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

question 99

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 its company 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.

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Definitions:

Coupon Rate

Yearly interest payment on a bond, specified as a percentage of its listed value.

Bond Prices

Bond prices are the market value of bonds, which can fluctuate based on interest rate changes, credit risk, and other factors.

Interest Rates

The cost of borrowing money, typically expressed as a percentage of the amount borrowed, which can influence economic activity by encouraging or discouraging spending and investment.

Coupon Bond

A bond that offers interest payments to its holder at fixed intervals until maturity, at which point the principal amount is repaid.