Under oligopoly, if one firm in an industry significantly increases advertising expenditures in order to capture a greater market share, it is most likely that other firms in that industry will
A) pursue a strategy to reduce advertising expenditures to maintain profits.
B) decide to increase advertising expenditures even if it means a reduction in profits.
C) make no changes in advertising expenditures because advertising is effective in the short run, but not the long run.
D) increase the price of the product to improve profits and then increase advertising expenditures.

Question

Quizplus · Accepted Answer

In an oligopoly, firms are interdependent, and if one firm increases advertising to capture market share, others are likely to follow suit to protect their own market share, even if it reduces profits.

Under Oligopoly, If One Firm in an Industry Significantly Increases