Which statement best explains the product life cycle?

• A. It refers to the process by which firms determine the price of a product.
• B. It describes the stages a product goes through from introduction to withdrawal from the market.
• C. It explains how government regulations affect the production of goods.
• D. It is the method by which consumers decide which products to purchase.

Answer: (B)

Verified step by step guidance

1. Understand that the product life cycle is a concept in microeconomics and marketing that describes the progression of a product through different stages in the market over time.
2. Identify the typical stages of the product life cycle: Introduction, Growth, Maturity, and Decline (or Withdrawal). Each stage reflects changes in sales, costs, and profits.
3. Recognize that the product life cycle helps firms and economists analyze how a product's market performance evolves, which can influence production, marketing strategies, and pricing decisions.
4. Note that the product life cycle is not about how firms set prices directly, nor about government regulations or consumer decision-making methods, but rather about the temporal stages a product experiences in the market.
5. Conclude that the best explanation of the product life cycle is that it describes the stages a product goes through from introduction to withdrawal from the market.