A home furniture store, David's Furnishings, lowers its prices below those of their competitors, Ada's Home Store. A price war then ensues. What must the response of Ada's Home Store have been in order for the price war to begin?
A.
Ada's Home Store started a marketing campaign against David's Furnishings and their lower quality.
B.
Ada's Home Store raised prices to show consumers that their products are better.
C.
Ada's Home Store took David's Furnishings to court in an attempt to make them raise their prices back up.
D.
Ada's Home Store lowered prices even lower than David's Furnishings did.
D. Ada's Home Store lowered prices even lower than David's Furnishings did.
D. Ada's Home Store lowered prices even lower than David's Furnishings did.
The answer is D. Ada's Home Store lowered prices even lower than David's Furnishings did.
In order for a price war to begin, Ada's Home Store would need to respond to David's Furnishings' lower prices by lowering their own prices even further. This would create a competitive environment where both stores continuously lower their prices in an attempt to attract customers. As a result, a price war occurs as each store tries to undercut the other and gain a larger share of the market.