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When cable TV consumers evade cable access fees by

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When cable TV consumers evade cable access fees by [#permalink] New post 11 Jun 2006, 23:03
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When cable TV consumers evade cable access fees by purchasing illegal 'pirated' cable boxes, a vicious cycle results. The use of pirated cable boxes by consumers forces cable companies to raise rates, which, in turn, leads more consumers to purchase pirated cable boxes in order to recieve free cable programming.

The vicious cycle described above could not result unless which of the following were true?

a) An increase in cable TV rates causes some consumers to cancel their service or reduce the number of premium channels to which they subscribe.

b) Some methods for detecting and disabling pirated cable boxes are effective at forcing pirated cable TV consumers to pay user fees or forgo cable TV programming, although the success rates vary considerably.

c) When cable TV executives establish cable access fees in order to generate an acceptable level of profit, they do not adequately account for revenue that will be lost through pirated cable use.

d) No one who routinely uses illegal pirated cable boxes can be induced by lower cable access fees to stop using pirated cable boxes unless fines for theuse of such boxes are raised at the same time.

e) Cable TV consumers do not differ with respect to the cable access fees that would cause them to consider purchasing illegal pirated cable boxes.

Please explain your rationale. Thanks.

Mike
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 [#permalink] New post 11 Jun 2006, 23:24
Will go with C.
The vicious cycle depends on cable TV companies increasing the rates.
If the cable TV companies take into account the loss of revenue due to piracy and decide the access fees they won't increase the access fees when few cable TV consumers resort to piracy
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 [#permalink] New post 11 Jun 2006, 23:29
I think the cycle starts with some consumers buying pirated cable boxes - B would prevent that, hence would end the 'vicious cycle'.

My vote to 'B'.
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 [#permalink] New post 12 Jun 2006, 00:12
The vicious cycle is triggered by the consumers who evade cable fees and go for pirated stuff...

If option 'B' is chosen then these consumers can never opt to illegal stuff.

So my vote is for 'B'
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 [#permalink] New post 12 Jun 2006, 04:16
what's wrong with D....
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 [#permalink] New post 12 Jun 2006, 06:32
C...
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 [#permalink] New post 12 Jun 2006, 06:58
Will not agree with

'D' - out of context. Fines may or may not be applied. Consumer response to the fine is not discussed here

'C' - out of context. cable operators operational profit is being discussed here.
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 [#permalink] New post 12 Jun 2006, 09:14
clearly B. if there are some means of stopping consumers from using pirated boxes then there wont be a vicious cycle.
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 [#permalink] New post 12 Jun 2006, 10:52
My answer is C.

Viscious Cycle --> People evade cable fees so company make less revenue so they increase cable fees so more people evade fees

This cycle would not happen if companies had given enough consideration to lost revenue and fixed the rates in such a way that they will generate their income, in which case they dont have to increase rates and more people will not start evading.
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 [#permalink] New post 12 Jun 2006, 12:42
Going with A on this...
consumers are price sensitive... price increase causes drop in services usage.

That causes, people to look for cheaper alternatives making them buy pirated boxes.

Last edited by haas_mba07 on 12 Jun 2006, 12:46, edited 1 time in total.
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 [#permalink] New post 12 Jun 2006, 12:43
mrmikec

Whats the OA?
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 [#permalink] New post 12 Jun 2006, 17:09
C.. no doubt.
If the executives took into account the piracy of cable, they would have built the increase in cost in their current fees. Hence they would not increase the fees if piracy did occur and thus negating the effect of the viscous cycle.
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 [#permalink] New post 12 Jun 2006, 17:14
If operators keep adding their operational cost and don't do anything to stop piracy or penalise those who are involved in it. How will the piracy stop?

Consumers are opportunists and always go for the cheaper means (of course not comprising with quality) which are free available and not controlled...

Lets wait for the OA... :roll:
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The OA [#permalink] New post 12 Jun 2006, 17:50
Beyond700 wrote:
If operators keep adding their operational cost and don't do anything to stop piracy or penalise those who are involved in it. How will the piracy stop?

Consumers are opportunists and always go for the cheaper means (of course not comprising with quality) which are free available and not controlled...

Lets wait for the OA... :roll:


The OA is C

Here we are looking for an assumption. For the cycle to occur, the lost revenue must force the cable companies to raise their rates. But if cable TV executives adequately account for revenue that will be lost through pirated cable use,then the vicious cycle would not occur.
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 [#permalink] New post 12 Jun 2006, 18:05
Thanks mr. mrmikec..

The cycle actually starts with the cable operators and not the consumers..

It is operators reaction to consumers actions. So 'C' makes sense...

Missed those prior explanations somehow..
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why A and B are incorrect [#permalink] New post 12 Jun 2006, 18:05
paddyboy wrote:
I think the cycle starts with some consumers buying pirated cable boxes - B would prevent that, hence would end the 'vicious cycle'.

My vote to 'B'.


The question is asking would needs to be true for the cycle NOT to even start. Both A and B would end the cycle once it begins but won't stop the cycle from starting. C hits it on the nose.

I think this is a fairly difficult question. You have to be careful to really understand what the question is asking. "not to end the cycle but to stop it even starting."

thanks for everyone's input.
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 [#permalink] New post 12 Jun 2006, 18:46
Just for your info, this is exactly the same question as the number 70 of the Verbal Official Guide. I mean instead of cable fees, it talks about income taxes, but the rest is exactly the same.

(When I read this question I knew I had seen it somewhere.)
  [#permalink] 12 Jun 2006, 18:46
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