John signed a two-year contract with Z-Gadget to get a subsidized price on his new iPhone. He had Z-Gadget's service for only six months when he became dissatisfied and wanted to cancel the contract. However, he did not do so because of high cancellation fees as well as new activation fees with another service. Which of the following characteristics of a powerful supplier group does Z-Gadget have with respect to its contract with John?
A) The supplier industry is more concentrated than the industry to which it sells.
B) Industry participants face switching costs in changing suppliers.
C) Suppliers offer differentiated products.
D) No substitutes exist for what the supplier group provides.

Question

Quizplus · Accepted Answer

Z-Gadget's high cancellation fees and new activation fees with another service indicate that industry participants face switching costs in changing suppliers. This is a characteristic of a powerful supplier group, as it can limit the ability of customers to switch to other suppliers. The other options are not applicable to the scenario given.

John Signed a Two-Year Contract with Z-Gadget to Get a Subsidized