Mario's Pizza wants to prevent Angelo's Pizza from entering the pizza delivery market. If Mario's Pizza advertises that it will always undercut any competitor's price, the effect of advertising ______Mario's Pizza's profits due to its cost and ______Mario's Pizza's profits due to a(n)______
In its demand.
A)decreases; decreases; increase
B)increases; increases; increase
C)decreases; increases; increase
D)decreases; decreases; decrease

Question

Quizplus · Accepted Answer

Advertising that Mario's Pizza will always undercut any competitor's price will decrease its profits due to cost, as it will have to lower prices to match or beat Angelo's Pizza. However, this may increase its profits due to an increase in demand, as customers may be enticed by the lower prices and choose Mario's Pizza over Angelo's Pizza. Overall, the effect on profits will depend on the balance between the decrease in profits due to cost and the increase in profits due to demand.

Mario's Pizza Wants to Prevent Angelo's Pizza from Entering the Pizza