Under oligopoly, if one firm in an industry significantly increases advertising expenditures 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. increase the price of the product to improve profits and then increase advertising expenditures.
D. make no changes in advertising expenditures because advertising is effective in the short run, but not the long run.
Answer: B
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A politician says that the government should tax behavior they want less of and subsidize behavior they want more of. This is an example of
A) cynical behavior in modern democracies. B) failing to consider the alternatives available to the government. C) a concern that people are not rational when they make decisions. D) using incentives to alter behavior.
Multiple estimates for major expenditures, warranties, and lemon laws all reduce the possible negative consequences of ________
a. bounded rationality b. winner's curse c. optimal search d. asymmetric information