As flat screen TVs enter the maturity stage of their product life cycle, what is most likely to happen to profits for individual firms?

• A. Profits will decrease due to increased competition and market saturation.
• B. Profits will increase rapidly as demand continues to grow.
• C. Profits will become unpredictable due to technological innovation.
• D. Profits will remain unchanged as costs and prices stabilize.

Answer: (A)

Verified step by step guidance

1. Understand the product life cycle stages: introduction, growth, maturity, and decline. Each stage has distinct characteristics affecting demand, competition, and profits.
2. Recognize that in the maturity stage, the market for flat screen TVs becomes saturated, meaning most potential customers already own the product, so demand growth slows down significantly.
3. Identify that increased competition is typical in the maturity stage as many firms try to maintain or grow their market share, often leading to price wars or increased marketing expenses.
4. Analyze how market saturation and intensified competition put downward pressure on prices and profit margins for individual firms.
5. Conclude that due to these factors, profits for individual firms are most likely to decrease during the maturity stage of the product life cycle.