Which of the following statements is true regarding initiating price cuts
A. Firms never cut prices; they only raise them.
B. If faced with excess capacity, a firm should not cut its price.
C. When faced with falling demand, firms should not cut prices.
D. Cutting price has no effect on costs.
E. Cutting prices in an industry loaded with excess capacity may lead to price wars.
Answer: E. Cutting prices in an industry loaded with excess capacity may lead to price wars.