Best Lights wants to prevent Bright Lights from entering the light bulb market. If Best Lights advertises that it will always undercut any competitor's price, the effect of advertising ______Best Lights' profits due to its cost and _______ Best Lights' profits due to a(n)______in its demand.
A)decreases; decreases; decrease
B)increases; increases; increase
C)decreases; decreases; increase
D)decreases; increases; increase

Question

Quizplus · Accepted Answer

The advertising cost directly decreases Best Lights' profits due to the expense. However, the threat to always undercut competitors can deter new entrants like Bright Lights, potentially increasing Best Lights' market share and demand, thereby increasing profits due to increased demand.

Best Lights Wants to Prevent Bright Lights from Entering the Light