In January 2011,Coca-Cola and Pepsi Agreed to Reduce Their Yearly

question 65

Multiple Choice

In January 2011,Coca-Cola and Pepsi agreed to reduce their yearly advertising budgets by $1 million each,and neither firm reneged on the agreement throughout the year.In January 2012,Coca-Cola and Pepsi each announced that their companies' 2011 profits had increased by $1 million.Which of the following is a likely explanation for this increase?

• A) A new entrant in the market caused Coca-Cola and Pepsi to lose substantial market share.
• B) The government imposed a punitive tax on both firms for producing a beverage that is a danger to public health.
• C) The firms had previously been in a prisoner's dilemma situation where one firm's advertisements were effectively canceling the other firm's advertisements.
• D) Coca-Cola drastically reduced the price of its soda relative to the price of Pepsi's soda.
• E) Pepsi drastically reduced the price of its soda relative to the price of Coca-Cola's soda.