Scenario 17-4. ​

Scenario 17-4.
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Consider two cigarette companies, PM Inc. and Brown Inc. If neither company advertises, the two companies split the market and earn $50 million each. If they both advertise, they again split the market, but profits are lower by $10 million 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. In this case, the company that advertises earns $60 million while the company that does not advertise earns only $30 million.
-Refer to Scenario 17-4. In 1971, Congress passed a law that banned cigarette advertising on television. If cigarette companies are profit maximizers, it is likely that

A) neither company opposed the ban on advertising.
B) Brown Inc. sued the federal government on grounds that the ban constitutes a civil rights violation.
C) both companies sued the federal government on grounds that the ban constitutes a civil rights violation.
D) both companies retaliated with black-market operations.

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