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Some airlines allegedly reduce fares on certain routes to a

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Re: CR-some airlines [#permalink] New post 27 Jan 2010, 10:47
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.
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Re: CR-some airlines [#permalink] New post 27 Jan 2010, 15:01
Nice and simple explanation given by Moss. Thanks.
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Re: CR-some airlines [#permalink] New post 24 Jul 2010, 12:19
Lot of discussion going on here...

I understand why B is correct, but I dont get why E is not. Please clarify. Thanks.
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Re: CR-some airlines [#permalink] New post 12 Jan 2011, 07:45
I would take D.
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Re: CR-some airlines [#permalink] New post 12 Jan 2011, 19:10
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 !!!!
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Re: CR-some airlines [#permalink] New post 22 Feb 2011, 11:03
B's good.
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Re: CR-some airlines [#permalink] New post 22 Feb 2011, 20:25
"believe" cannot be the word in the real gmat answer. This question is too un gmat-like

BTW this is predator dynamics :) . I found a very good explanation by Ron - I pray I dont see the jugglery of words "believe" and "likely" - I usually thrash them into garbage when doing the CR. The reason gmat answer is based on more than someone's belief to be correct. Other answers fail to do what it does - thats why its the only credited answer.

http://www.manhattangmat.com/forums/cr- ... t1832.html
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Re: Some airlines allegedly reduce fares on certain routes to a [#permalink] New post 17 Jan 2012, 16:43
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.

The underlying assumption of the argument is that lowering ticket fares for a long time is not profitable

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.
This supports the argument
(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 argument and hence the correct answer. This is because original argument assumes that loss occurs if airlines continue with the reduced price. The fact that airlines are willing to lower price further if competition arises means that this method should be profitable in the long run thus weakening the argument.
(C) As part of promotions designed to attract new customers, airlines sometimes reduce their ticket prices to below an economically sustainable level.
This supports the argument and hence incorrect answer
(D) On deciding to stop serving particular routes, most airlines shift resources to other routes rather than reduce the size of their operations.
Stop serving particular routes is beyond the scope of argument
(E) When airlines dramatically reduce their fares on a particular route, the total number of air passengers on that route increases greatly.
This supports the argument and hence incorrect answer
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Re: Some airlines allegedly reduce fares on certain routes to a [#permalink] New post 25 Jan 2012, 08:55
I think E
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Re: Some airlines allegedly reduce fares on certain routes to a [#permalink] New post 27 Jan 2012, 16:22
+1 E
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Re: Some airlines allegedly reduce fares on certain routes to a [#permalink] New post 09 Jan 2014, 11:28
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Re: CR-some airlines [#permalink] New post 11 Jan 2014, 04:36
milo wrote:
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.

E) When airlines dramatically reduce their fares on a particular route, the total number of air passengers on that route increases greatly.
Here E is definitely incorrect and you explained it well.

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.
But, I think there is a problem with B. In my opinion, it actually strengthens the argument.
Firstly the airline company is offering tickets at a low price and going into some loss. Furthermore, B option says it is very likely to do so again if new competitors emerge. It means that it will again reduce the price of their tickets, further going into loss. So, it actually strengthens the argument that this method is not profitable.

By the way what is the source of this question?
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Re: CR-some airlines [#permalink] New post 11 Jan 2014, 04:38
noboru wrote:
Lot of discussion going on here...

I understand why B is correct, but I dont get why E is not. Please clarify. Thanks.


Hi,

Please find the explanation below:

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.
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Re: Some airlines allegedly reduce fares on certain routes to a [#permalink] New post 11 Jan 2014, 05:36
To drive off competitors, airlines reduce fares (even lose money)
BUT, not profitable for long-term (CONCLUSION)
Attempt to earn back losses by raising fares > give chance to competitors

Option A > 'some countries' / irrelevant
Option B > Weakening (solving the problem raised in the argument)
Option C > already implied / adds nothing
Option D > no mention of fluctuating fares and competition
Option E > 'number of air passengers' / irrelevant

Hence, B is the answer.
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Re: Some airlines allegedly reduce fares on certain routes to a [#permalink] New post 11 Jan 2014, 17:48
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...
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Re: Some airlines allegedly reduce fares on certain routes to a [#permalink] New post 08 Sep 2014, 03:12
nitya34 wrote:
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.
(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.
(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.

Pls elaborate


I think "However, this method of eliminating competition cannot be profitable in the long run." is the main conclusion of the argument.

statement B says that "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."... if this is taken to be true and every now and then a new competitor appears in the market and the airline drops the price to eliminate the new competitors, then in the long run the cycle continues... price drop -->eliminate competitor--> coming of new competitor --> again price drop.

on the other hand answer choice E seems to be the better choice between B and E.
Re: Some airlines allegedly reduce fares on certain routes to a   [#permalink] 08 Sep 2014, 03:12
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