Under Oligopoly, If One Firm in an Industry Significantly Increases

question 137

Multiple Choice

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.

---

Definitions:

Indirect Method

A technique used in cash flow statement preparation that starts with net income and adjusts for non-cash transactions and changes in working capital to arrive at cash flow from operating activities.

Operating Activities

Business actions that pertain to the primary operations of a company, including production, distribution, and other processes that generate revenue.

Net Income

The total profit or loss of a company after all revenues, expenses, taxes, and costs have been subtracted from total revenue.

Operating Activities

Business activities directly related to the production, sale, and delivery of a company's products or services, generating the majority of its revenue and expenses.