In a market where two firms, Firm A and Firm B, are deciding whether to advertise their products, both firms must consider the potential responses of their competitor. If Firm A decides to advertise and Firm B does not, Firm A could gain significant market share but incur high costs. Conversely, if both firms choose to advertise, their profits might decrease due to increased competition. Given this scenario, what best describes the Nash Equilibrium in this context?

In this situation, the Nash Equilibrium occurs when both Firm A and Firm B choose to advertise their products. This is because if one firm decides to stop advertising while the other continues, the one that advertises will gain more customers, leading to a loss for the non-advertising firm. However, if both firms advertise, they both share the market, and neither can improve their situation by changing their strategy alone, as doing so would only lead to reduced profits. For example, if both firms spend money on advertising, they may attract customers but also increase their costs, balancing out their market shares. Therefore, the Nash Equilibrium reflects a stable outcome where both firms continue advertising, knowing that changing their strategy wouldn't lead to a better result for either.