Final answer:
True, the attractiveness of the price/performance ratio of substitutes limits an industry's ability to charge high prices due to the competitive nature of the market and the principles of demand and supply.
Step-by-step explanation:
The statement that the price/performance ratio of substitute products tightly constrains an industry's ability to charge high prices is indeed true. For instance, if a product has many substitutes with better price/performance ratios, customers can easily switch to those alternatives if the original product's price becomes too high.
This competitive pressure forces firms in the industry to maintain reasonable prices to retain customers.
This concept is linked to the laws of demand and supply, where a high price usually means lower quantity demanded, and a low price can lead to higher demand, assuming the quality is deemed acceptable by the consumer.
In a perfect competition scenario, like with the independent truckers mentioned in the provided text, firms are price takers due to the homogeneity of the products offered and the ease of entry and exit from the market.
They cannot increase their prices without risking the loss of all their sales, as buyers would turn to numerous other providers offering the same service at a lower cost.