Which of the following statements is NOT true about the product life cycle?
A. As industry sales rise, industry profits also rise.
B. Each stage may have a different target market.
C. In general, competition tends to move toward pure competition.
D. Industry profits start to decrease in market growth.
E. Both (A) and (D)
Answer: (A) is the correct answer because it is the only statement that is entirely not true. Just because industry sales rise doesn't mean that industry profits will also rise. Increased competition among individual companies within the industry could prompt lower selling prices in the industry which would lead to lower profits for the industry. Increased sales could also prompt expensive investments in capital equipment which would decrease profits if the individual firms are already operating at full capacity. (B) is not the correct answer because the statement is true. Customers' attitudes as well as needs will change over time. Thus, a customer who bought the product in the past may no longer have need for the product, or a customer who previously didn't have a need for the product may acquire a need for the product (target markets may change). (C) is also not correct because the statement is true. Once a product proves its profit potential, everybody will want to sell the product to get a piece of the "profit ie." (D) is also incorrect because the statement is true. Growth refers to sales growth, not necessarily profit growth. Remember, competition enters in this stage, which, in general, tends to decrease profits. (E) is also not correct because although (D) is true, (A) is not true.