Consider Two Cigarette Companies, PM Inc

Consider two cigarette companies, PM Inc. and Brown Inc. If neither company advertises, the two companies split the market. If they both advertise, they again split the market, but profits are lower, since each company must bear the cost of advertising. Yet, if one company advertises while the other does not, the one that advertises attracts customers from the other.
-Refer to the information provided. In 1971, the federal passed a law that banned cigarette advertising on television. After the ban which of the following is most likely to have happened? (i) profits of cigarette companies rose
(ii) the prisoners' dilemma for the two companies with respect to television advertising was solved
(iii) profits of cigarette companies fell

A) (i) and (ii)
B) (ii) and (iii)
C) (i) and (iii)
D) (i) , (ii) and (iii)

Correct Answer:

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