Final answer:
A competitor's introduction of a new product in a mature market can lead a company to import low-cost alternatives in an attempt to remain competitive. High tariffs and permit systems may protect domestic industries but can result in negative economic consequences. True, a competitor with a low-cost product can provoke such a strategic response.
Step-by-step explanation:
True, a competitor offering a new product in a mature market can indeed entice a company to start importing its own low-cost alternative. This is a strategic response to competition from firms with better or cheaper products, which can reduce a business's profits and potentially drive it out of business. In an effort to stay competitive, domestic firms may have to match the low prices offered by these imports. However, doing so could mean selling under cost, leading to unsustainable losses. Over time, the domestic company could be forced to exit the market, allowing importers to establish a monopoly and potentially raise prices significantly.
High tariffs and complex permit systems might protect domestic companies temporarily by reducing foreign competition, but this can also lead to reduced job creation, higher prices, and poorer quality products due to lack of competition. Moreover, restricting imports to protect a nation's interests can lead to economic inefficiencies and might provoke retaliation from trade partners, further complicating international relations and commerce.