Substitute Products

question 10

Multiple Choice

Substitute products

• A) reduce the potential attractiveness and profitability of a target industry.
• B) represent those items manufactured by direct rivals within a target industry.
• C) are usually cheaper than the products they can replace.
• D) are always a serious threat to rivals in a target industry.

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Definitions:

Death Spiral

A situation occurring when transfer prices include fixed costs and users reduce their use of the internal product or service. This further increases the transfer price (based on average cost) and more users reduce their demand.

Internal Pricing System

A method used by companies to assign a price to goods or services exchanged between the different divisions of the same company.

Legal Department

A specialized division within a corporation or organization tasked with handling legal matters and ensuring compliance with laws and regulations.

Joint Costs

Costs that are incurred to produce or acquire two or more products at the same time and cannot be readily identified with the individual products.