In which of the following cases would a company's profits be threatened?
A)The threat of potential substitutes for its product diminishes.
B)Barriers to entry into its industry rise.
C)Its customers face higher switching costs.
D)One of its key input providers gains market power in the input market.

Question

Quizplus · Accepted Answer

If one of the company's key input providers gains market power in the input market, it may be able to raise prices or reduce the quality of inputs, which could lead to higher costs for the company and lower profits. The other choices do not necessarily threaten a company's profits; potential substitutes may increase competition but do not necessarily harm profits, higher barriers to entry can actually increase a company's market power, and higher switching costs can make customers more loyal to the company's products.

In Which of the Following Cases Would a Company's Profits