Scenario: Company A and Company B are considering spending a certain sum of money to advertise their new range of products. If Company A chooses to advertise while Company B does not, Company A's annual sales will increase by $5 million, while Company B's sales will remain unchanged. If Company B chooses to advertise while Company A does not, Company B's annual sales will increase by $5 million, while Company A will not experience any change in its sales. If both the companies decide to advertise, their sales will increase sales by $2 million each, and if neither of them spends on advertisement, their sales will remain unchanged.
-Refer to the scenario above.Which of the following is true?
A) Company A should not advertise its products irrespective of what Company B does.
B) Company B should not advertise if Company A decides to advertise its products.
C) Company A should advertise if Company B decides to advertise its products.
D) Company B should not advertise its product irrespective of what Company A does.

Question

Quizplus · Accepted Answer

If Company B decides to advertise, Company A should also advertise to increase their sales by $2 million each (total $4 million increase). If Company A decides to advertise, Company B should not advertise as their sales will remain same and they will not gain any advantage. Therefore, the best choice is C.

Scenario: Company a and Company B Are Considering Spending a Certain