Quote:
A product that represents a clear technological advance over competing products can generally command a high price. Because technological advances tend to be quickly surpassed and companies want to make large profits while they still can, many companies charge the maximum possible price for such a product. But large profits on the new product will give competitors a strong incentive to quickly match the new product's capabilities. Consequently, the strategy to maximize overall profit from a new product is to charge less than the greatest possible price.
In the argument above, the two portions in boldface play which of the following roles?
A. The first is an assumption that forms the basis for a course of action that the argument criticizes; the second presents the course of action endorsed by the argument.
B. The first is a consideration raised to explain the appeal of a certain strategy; the second is a consideration raised to call into question the wisdom of adopting that strategy.
C. The first is an assumption that has been used to justify a certain strategy; the second is a consideration that is used to cast doubt on that assumption.
D. The first is a consideration raised in support of a strategy the argument endorses; the second presents grounds in support of that consideration.
E. The first is a consideration raised to show that adopting a certain strategy is unlikely to achieve the intended effect; the second is presented to explain the appeal of that strategy.
With any BF question, start with the conclusion, if possible: "the strategy to maximize overall profit from a new product is to charge less than the greatest possible price."
Now let's look at the argument WITHOUT worrying about the BF:
- "A product that represents a clear technological advance over competing products can generally command a high price." - If your company comes up with a technologically advanced product, you can charge a high price.
- "Because technological advances tend to be quickly surpassed and companies want to make large profits while they still can, many companies charge the maximum possible price for such a product." - You can charge a high price because your product has a technological advantage over competing products. You assume that whatever technological advantage you have will soon be surpassed. Until that happens, you want to charge as much as possible to immediately maximize your profits.
- "But large profits on the new product will give competitors a strong incentive to quickly match the new product's capabilities." - If you charge the maximum possible price to maximize your profits, competing companies will see how much money you are making and say, "Wow, we should do something like that too!" By maximizing your own profits, you are giving competing companies an incentive to quickly "catch up" and make a product with similar capabilities.
- This implies that if, instead, you DON'T try to maximize profits and DON'T charge the highest possible price, competing companies will have less incentive to copy you. That will allow you to enjoy your technological advantage for a longer period of time and, according to the author, maximize your profits in the long run.
So most companies tend to try to maximize profits immediately by charging the highest possible price. According to the author, they would make more money in the long run by charging
less than the greatest possible price.
Once you understand the argument, you can look back at the BF portions:
Quote:
Because technological advances tend to be quickly surpassed and companies want to make large profits while they still can...
This is the reason why companies tend to charge the highest possible price. In other words, this explains the appeal of a certain strategy (the strategy of charging the highest possible price). But the author does NOT endorse that strategy. The author argues that companies should charge LESS than the greatest possible price.
Looking at choice (D), the first BF portion is "a consideration raised in support of a strategy", but it is not a strategy that the argument
endorses. (D) must be eliminated.
Choice (B) accurately describes the first BF portion as "a consideration raised to explain the appeal of a certain strategy"--not the strategy endorsed by the author, but the strategy that many companies employ (charging the highest possible price).
Quote:
But large profits on the new product will give competitors a strong incentive to quickly match the new product's capabilities.
This explains how the strategy that many companies employ (charging the highest possible price) could backfire. So the first BF explains the
appeal of the highest-price strategy, and the second BF portion explains why adopting that strategy might be a bad idea. In other words, the second BF portion "is a consideration raised to call into question the wisdom of adopting that strategy." Again, choice (B) is spot on.
As for choice (D), the "consideration" is the first BF portion. The second BF portion does not
support the first BF portion, so (D) doesn't work.
(B) is the best answer.
close
Updated on: 12 Oct 2018, 03:49
35%
(medium)
28%
(02:19)
wrong 
