Answer & Solution
Answer: Option
B
Solution:
The correct answer is (B) growth. Here's why:
Let's break down the product life cycle (PLC) and how profits are affected at each stage:
* Introduction: This is when a product is brand new.
High costs are involved in marketing and production,
and sales are usually low.
Therefore, profits are generally low or even negative during this phase.
* Growth: The product gains acceptance.
Sales increase rapidly, and production costs decrease due to economies of scale.
Profits rise significantly as more people buy the product.
This is the period of highest profit growth and likely the highest overall profit.
* Maturity: Sales growth slows down, and the market becomes saturated.
Competition intensifies, and companies might need to lower prices or increase marketing spend to maintain market share.
Profits start to decline, although they may still be significant.
* Decline: Sales and profits fall as the product becomes obsolete or loses popularity.
Companies may discontinue the product or try to find new uses for it.
Profits are very low or negative.
So, the period when profits are likely to be highest is during the growth stage.
