A Firm That Is First to the Market with a New

question 158

Multiple Choice

A firm that is first to the market with a new product frequently discovers that there are design flaws or problems with the product that were not anticipated.How do these problems affect the innovating firm?

• A)The firm is protected by a first-mover advantage: initial design flaws tend not to harm a firm significantly because consumers resist changing products for fear of incurring high switching costs.
• B)They reduce profits for the new innovations and open the door to competitors who can enter the new market with a better product.
• C)Because these design flaws were not anticipated, consumers tend to be more forgiving and are likely to remain loyal to the company and its products.
• D)The firm's cost increases as it improves the product but it will not be able to raise its price for fear of alienating customers. Consequently, its profits will erode although its market share remains secure.

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Definitions:

Antecedent Factor

An element, condition, or event that precedes a behavior or occurrence and influences its outcome or existence.

Cardiovascular Reactivity

The responsiveness of the cardiovascular system to stress or stimuli, indicating how heart rate, blood pressure, and blood flow change in response.

Psychologically Significant Stimulus

Refers to any event or object that has a notable impact on an individual's psychological state or behavior.

Psychosocial Variables

Psychological and social factors that influence an individual's mental health and behavior.