An online movie streaming service charges $14.4.99 per month for its basic package.However,when a competitor introduced the same service at
$13)3.3.99,the firm dropped its price to
$13)3.3.99.The firm most likely made this price reduction in an attempt to
A) decrease revenue but increase profit.
B) increase profit by increasing revenue.
C) maintain market share.
D) decrease market share.
E) increase efficiency.

Question

Quizplus · Accepted Answer

The firm most likely made this price reduction to maintain its market share in the face of competition from the new entrant. By matching the competitor's price, the firm hopes to prevent customers from switching to the new service and keep its own customer base intact. This strategy may lead to a decrease in revenue, but it is necessary to maintain market share in the long run.

An Online Movie Streaming Service Charges $14