Which of the following statements is true of the growth stage in the industry life cycle?

• A. Market demand declines and firms begin to exit the industry.
• B. Prices typically rise due to limited supply and high barriers to entry.
• C. Product innovation is rare and competition is minimal.
• D. Firms experience increasing demand and often expand production capacity.

Answer: (D)

Verified step by step guidance

1. Understand the industry life cycle stages: introduction, growth, maturity, and decline. Each stage has distinct characteristics regarding demand, competition, and firm behavior.
2. Recall that the growth stage is characterized by rapidly increasing market demand as more consumers adopt the product, leading to expanding sales.
3. Recognize that during the growth stage, firms often increase production capacity to meet rising demand and may invest in marketing and distribution to capture market share.
4. Note that prices typically stabilize or may even decrease due to economies of scale and increased competition, rather than rising due to limited supply.
5. Understand that product innovation is usually active during the growth stage to differentiate products, and competition intensifies rather than being minimal.