Max Verstappen is a genuine contender for the 2019 world championship.
Verstappen is 63 points behind championship leader Lewis Hamilton.
"There are still 260 points available for a driver, so the mathematics tells us that we must take Max seriously," Mercedes team boss Wolff said.
"We are also not writing off Ferrari. We must increase the pressure in order to stay ahead."
Earlier, Ferrari was Mercedes' biggest rival for the title. But Wolff now acknowledges that Red Bull is riding a wave.
"Red Bull has always had one of the best chassis, and Honda has made a big leap forward," he said.