Some airlines allegedly reduce fares on certain routes to a level at

IMO the answer should be B. The author says first competitors are driven off these routes, but they will come back once the airline x charges higher prices again (i.o. to become profitable). Answer B says "no, the competitors won't come back because once they start flying these routes again the airline x will lower prices again and nobody makes any profit".

On answer E: The increase in passenger numbers could lead to higher utilization of planes and this higher efficiency to profitability, but it could also lead to the following: if I sell flight tickets for 1 Dollar I will make 100 Dollar loss on every customer. If the total number of airline passengers increases greatly, I may lose even more money.

A.incorrect.the legality or the illegality of the price cutting is out of question.the main concern is the profit and loss of the concerned company
C.Incorrect.In my opinion,this strengthens the argument by pointing out that the airlines reduce the pay to unsustainable levels that losses will occur.
D.Incorrect.Shifting of the resources to other routes is irrelevant.
E.Incorrect.The number of passengers on a route has little to do with the argument.
B.Correct.Best describes the point that even if the competitors come back to the original routes the Company concerned is willing to drop the prices again to low levels.Hence weakens the argument that it will provide the competitors with a better opportunity.

Some airlines allegedly reduce fares on certain routes to a level at which they lose money, in order to drive competitors off those routes. However, this method of eliminating competition cannot be profitable in the long run. Once an airline sucessfully implements this method, any attempt to recoup the earlier losses by charging high fares on that route for an extended period would only provide competitors with a better opportunity to undercut the airline's fares.

Which of the following, if true, most seriously weakens the argument?

A) In some countries it is not illegal for a company to drive away competitors by selling a product below cost.

B) Airline executives generally believe that a company that once underpriced its fares to drive away competitors is very likely to do so again if new competitors emerge.
Correct Answer
Reason: Conclusion talks about the methodology of cutting pricing on a route to kick out competitors. Only this options gives a weakening stand to this methodology!

C) As part of promotions designed to attract new customers, airlines sometimes reduce their ticket prices to below an economically sustainable level.

D) On deciding to stop serving particular routes, most airlines shift resources to other routes rather than reduce the size of their operations.

E) When airlines dramatically reduce their fares on a particular route, the total number of air passengers on that route increases greatly.

Some airlines allegedly reduce fares on certain routes to a level at which they lose money, in order to drive competitors off those routes. However, this method of eliminating competition cannot be profitable in the long run. Once an airline successfully implements this method, any attempt to recoup the earlier losses by charging high fares on that route for an extended period would only provide competitors with a better opportunity to undercut the airline's fares.

Which of the following, if true, most seriously weakens the argument?

(A) In some countries it is not illegal for a company to drive away competitors by selling a product below cost. (NOT RELAVANT)
(B) Airline executives generally believe that a company that once underpriced its fares to drive away competitors is very likely to do so again if new competitors emerge.
CONCLUSION: However, this method of eliminating competition cannot be profitable in the long run.
ANSWER: Must weaken the conclusion. Ans: B is a cyclic process.
(C) As part of promotions designed to attract new customers, airlines sometimes reduce their ticket prices to below an economically sustainable level.(ATTRACTS NEW CUSTOMERS...INCREASE REVENUES BUT DOES NOT DRIVE COMPETITIORS)
(D) On deciding to stop serving particular routes, most airlines shift resources to other routes rather than reduce the size of their operations.(THIS WILL SAVE MONEY BUT DOES NOT DRIVE COMPETITIORS)
(E) When airlines dramatically reduce their fares on a particular route, the total number of air passengers on that route increases greatly.(WILL INCREASE REVENUES NO DISCUSSION ABOUT NOT DRIVE COMPETITIORS)

HOPE THIS HELPS !!!!

PREMISE - Some airlines allegedly reduce fares on certain routes to a level at which they lose money, in order to drive competitors off those routes.
PREMISE - Once an airline successfully implements this method, any attempt to recoup the earlier losses by charging high fares on that route for an extended period would only provide competitors with a better opportunity to undercut the airline's fares.
CONCLUSION - This method of eliminating competition cannot be profitable in the long run.


Which of the following, if true, most seriously weakens the argument? WE ARE LOOKING FOR A SOLUTION WHERE IN THIS METHOD IS PROFITABLE IN A LONG RUN...

(A) In some countries it is not illegal for a company to drive away competitors by selling a product below cost....SO WHAT
(B) Airline executives generally believe that a company that once under priced its fares to drive away competitors is very likely to do so again if new competitors emerge... SO NEW COMPETITORS can again be eliminated and profit resumed by fare hike
(C) As part of promotions designed to attract new customers, airlines sometimes reduce their ticket prices to below an economically sustainable level...... already known.........but if they go too low on prices ... it would rather be a strengthener...
(D) On deciding to stop serving particular routes, most airlines shift resources to other routes rather than reduce the size of their operations....routes don't matter....profit does.....
(E) When airlines dramatically reduce their fares on a particular route, the total number of air passengers on that route increases greatly...BUT WOULD STILL BE AT LOSSES AS PER THE OPENING STATEMENT...

Some airlines allegedly reduce fares on certain routes to a level at which they lose money, in order to drive competitors off those routes. However, this method of eliminating competition cannot be profitable in the long run. Once an airline successfully implements this method, any attempt to recoup the earlier losses by charging high fares on that route for an extended period would only provide competitors with a better opportunity to undercut the airline's fares.

In short, the airlines can drive off the competitors and the loss they make, the airlines cannot recoup that losses by charging high fares for an extended period (Conclusion of the argument) and the competitors can easily come back by under cutting the prices.

Which of the following, if true, most seriously weakens the argument?

(A) In some countries it is not illegal for a company to drive away competitors by selling a product below cost.
Not worried about the legality of the process -> OFS

(B) Airline executives generally believe that a company that once underpriced its fares to drive away competitors is very likely to do so again if new competitors emerge.
This weakens the conclusion as when the competitors come back and try to under cut the prices, the airlines again do so to drive off the competitors -> Correct

(C) As part of promotions designed to attract new customers, airlines sometimes reduce their ticket prices to below an economically sustainable level.
That is given in the premise. It doesn't talk about weakening the argument

(D) On deciding to stop serving particular routes, most airlines shift resources to other routes rather than reduce the size of their operations.
In fact this strengthens the argument

(E) When airlines dramatically reduce their fares on a particular route, the total number of air passengers on that route increases greatly.
Losses * (Number of passengers) = More losses

Here is why E cannot be right.

From the argument:



In other words, while holding fares at the level necessary for driving away competitors, the airline doing so loses money.

Here's what E says.



Notice, what E say does not undermine the conclusion, because even with the increase in passengers mentioned in E, the airline offering the lower prices will continue to lose money. A money losing fare level is a money losing fare level regardless of how many passengers an airline has at that level. So, adding the information provided by E does not change the conclusion that the strategy is not profitable.

Hoping that experts would help me out here with the reasoning - I was stuck between B and E and picked E.
How does B win over E?
(B) Airline executives generally believe that a company that once underpriced its fares to drive away competitors is very likely to do so again if new competitors emerge. - This means that competition won't enter the market of that particular route; cause the initial company would reduce its prices again. A contender

(E) When airlines dramatically reduce their fares on a particular route, the total number of air passengers on that route increases greatly.This means that the particular airline would make profits, another contender

So one talks about profit (E) and one talks about competition (B); and both weaken - can anyone help me on this?

One key to getting the correct answer to a CR question is being very clear regarding what conclusion you are seeking to weaken or strengthen.

Here is the conclusion to this argument in this question.

this method of eliminating competition cannot be profitable in the long run.

Notice, in order to be profitable, the airline has to increase fares.

E does not indicate that the airline will be profitable, as E says what will happen when the fares are STILL DRAMATICALLY REDUCED. As long as the fares are dramatically reduced, the route will not be profitable no matter how many passengers take that route.

B, by indicating that it is likely that other airlines will stay out of the market even if the airline controlling the route increases prices, shows a path to profitability for the airline that took control of the route by underpricing the competition.

I want to understand why option E is incorrect. In the long term, profitability may be sustained because of more number of passengers that the airlines managed to attract.

Whereas in option B, the airlines will again decrease prices thereby affecting profitability further.

Need an expert's opinion on this question.

Adding to what GMATNinja said - The conclusion says that eliminating competition cannot be profitable in the long run. Why? Because competitors will undercut airline's fare.
Now, the whole process involves two step - 1. Airline reduces price . 2. Airline increases price/ competitors undercut airline's price
Our argument focuses on second step.
The correct answer choice must show that why eliminating competition strategy will remain profitable even after competitors lower their fare below that of the airline.
Choice E may suggest that profitability of the airline will increase when airline reduces its fare (looks more relevant to step 1) , but it doesn't fit the reasoning structure. It doesn't take into account the support (highlighted in yellow) that we provided for the conclusion.

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Dear experts

The conclusion for this prompt that needs to be weakened according to my understanding is "However, this method of eliminating competition cannot be profitable in the long run"

Now, when we are talking about long run profitability, I don't understand how B weakens the conclusion i.e. suggests that cutting the prices as soon as any competitor comes will lead to higher profitability "in the long run".

Wouldn't strategy in option B just constrain the firm's business even more by selling the product at low/no profitability time and again?

Am I assuming too much?

Also, if there is an alternate flow of thoughts that should occur to me as soon as I see option B, how am I supposed to think the right way, and thus arrive at the correct answer?

Thanks!

Hi

We should always look to dovetail the facts presented in the answer option with the premises presented in the stimulus.

In this question, the conclusion is that a strategy to underprice an airline's competitors away from a route will be counterproductive in the long run because any attempts to recoup the losses will fail. In order to weaken this, we need an answer that suggests that this will not fail.

As per the premise stated, the failure of the attempt to recoup losses will be because it will allow competitors to undercut the airlines prices. In order to weaken the conclusion, this line of reasoning needs to be broken ie; we need something that says that competitors will not be able to undercut the airline's prices once they are driven out of a route.

Option (B) states that "a company that once underpriced its fares to drive away competitors is very likely to do so again if new competitors emerge". If this is true, then once the company raises prices to recoup losses, the belief stated in this option will prevent other competitors from re-entering the route and undercutting the airline's prices while it is attempting to recoup the losses. Hence, the airline may be able to recoup its losses.

Hope this helps.

A C and D are irrelevant.

E says no of travelers increases in tat route. So wont they opt for other airliners when seats will be over?

B says that the airliner will apply the same marketing trick again to dominatr the route and hence drive off competitors. The airliner may makeup its losses with ticket sale from other routes with surged prices but right now it just wants to dominate that particular route. Hence B.

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Well, according to the argument, WHY exactly is this method not profitable in the long run?


So here's how the logic breaks down:

• An airline can drive competitors off a route by reducing fare to a level at which the airline loses money.
• Then the airline could recoup losses by charging high fares on that route.
• However, charging high fares on that route for an extended period would only provide competitors with a better opportunity undercut those higher fares.
• Therefore, this method of eliminating competition cannot be profitable in the long run.

You seem to be assuming that once an airline reduces fares and drives competitors off a route, then that airline must continue selling tickets at that reduced fare. However, the passage doesn't say this. The passage implies that if an airline drive competitors off a route, then the airline's next action is to recoup losses by charging high fares on that route.

The author argues that this action cannot be profitable in the long run, because competitors can then come back on the route to compete with higher fares.

Now, here's choice (B) one more time:


This choice gives us a reason why competitors would NOT choose to come back. If airline executives believe that coming back on a route they've been driven off will result in the leading airline once again reducing its fares, then we'll have less reason to believe that competitors will return at all.

(B) most seriously weakens the argument because it explains one way that competitors are deterred from disrupting the method in question.

I hope this helps!

Hi There! I want to know why is 'D' not a correct answer. It clearly states that when airlines stop serving particular routes they shift their operations to some other route rather than reducing the operations on that route.

Pre-thinking
Competition will be bankrupt and won't return.
Competition won't return for the fear of being undercut again.

(A) In some countries it is not illegal for a company to drive away competitors by selling a product below cost. -- Incorrect. Completely irrelevant to the reasoning.

(B) Airline executives generally believe that a company that once underpriced its fares to drive away competitors is very likely to do so again if new competitors emerge. Correct. This is a bit of an inference in so far as the author presumes that if the airline will undercut again then competition would be deterred and not return.

(C) As part of promotions designed to attract new customers, airlines sometimes reduce their ticket prices to below an economically sustainable level. -- Incorrect. Irrelevant to the reasoning.

(D) On deciding to stop serving particular routes, most airlines shift resources to other routes rather than reduce the size of their operations. Incorrect. Trap choice. But in reality it actually strengthens the conclusion. Not weaken it.

(E) When airlines dramatically reduce their fares on a particular route, the total number of air passengers on that route increases greatly. Incorrect. Completely irrelevant to the argument.