Substitutes erode profits because of which of the following factor?
A)Substitutes compete for similar inputs driving up production costs
B)Substitutes divide demand and drive up internal rivalry
C)Firms producing substitutes use similar worker skills dividing the labor pool
D)Manufacturers of substitutes enter markets later and have lower sunk costs
E)None of the above

Question

Quizplus · Accepted Answer

Substitutes divide demand and lead to increased competition among firms, which can drive down prices and profits. Option A may be true if substitutes use similar inputs, but it is not always the case. Option C may be true in some cases, but it is not a universal factor. Option D is unrelated to substitutes eroding profits. Option E is not the correct answer, as substitutes can indeed erode profits.

Substitutes Erode Profits Because of Which of the Following Factor