Final answer:
The statement is false; most firms' gross profit percentages are typically stable year-to-year, barring significant economic disruptions.
Step-by-step explanation:
False, for most firms, the gross profit percentage does not change significantly from year to year. While individual firms can experience fluctuations, on a broader scale, gross profit percentages are generally stable unless influenced by major economic events, such as the financial crisis of 2008 and 2009.
Profitability is essential for a firm's endurance in the market. Firms that cannot sustain profits may ultimately exit the market, particularly impacting small businesses with fewer than 20 employees, which represent the majority of business entries and exits. Moreover, competition can influence profits by introducing better or cheaper products to the market, compelling businesses to adapt to maintain profitability.