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Firms adopting "profit-related-pay"(PRP) contratcs

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Firms adopting "profit-related-pay"(PRP) contratcs [#permalink]

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New post Updated on: 25 Jan 2008, 15:33
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Firms adopting "profit-related-pay"(PRP) contratcs pay wages at levels that vary with the firm's profits. In the metal working industry last year, firms with PRP contracts in place showed productivity per worker on average 13 percent higher than that of their competitors who used more traditional contracts.

If, on the basis of the evidene above, it is argued that PRP contracts increase worker productivity, which of the following, if true, wud most seriously weaken the argument?

(A)Results similar to those cited for the metalworking industry have been found in other industries where PRP contracts are used.
(B)Under PRP contracts costs other than labor costs, such as plant, machinery,a nd energy, make up an increased proportion of the total cost of each unit of output.
(C)Because introducing PRP contracts greatly changes individual workers' relationships to the firm, negotiating the introduction of PRP contracts is complex and time consuming.
(D)Many firms in the metalworking industry have modernized production equipment in the last five years, and most of these introduced PRP contracts at the same time.
(E)In firms in the metalworking industry where PRP contracts are in place, the average take home pay is 15 % higher than it is in those firms where workers have more traditional contracts.

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Originally posted by blog on 25 Jan 2008, 15:11.
Last edited by blog on 25 Jan 2008, 15:33, edited 1 time in total.
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Re: CR-FIRMS [#permalink]

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New post 25 Jan 2008, 21:52
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D, is it?

Weaken --> Conclusion : PRP contracts increase worker productivity

(A)Results similar to those cited for the metalworking industry have been found in other industries where PRP contracts are used. Crossed out: support the conclusion.
(B)Under PRP contracts costs other than labor costs, such as plant, machinery,a nd energy, make up an increased proportion of the total cost of each unit of output.Crossed out: out of scope
(C)Because introducing PRP contracts greatly changes individual workers' relationships to the firm, negotiating the introduction of PRP contracts is complex and time consuming.Crossed out: out of scope.
(D)Many firms in the metalworking industry have modernized production equipment in the last five years, and most of these introduced PRP contracts at the same time. Not the PRP contracts but the new equipment helps to increase worker productivity. - Weaken
(E)In firms in the metalworking industry where PRP contracts are in place, the average take home pay is 15 % higher than it is in those firms where workers have more traditional contracts.Crossed out: Say nothing about the productivity.
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Re: CR-FIRMS [#permalink]

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New post 26 Jan 2008, 00:14
(A)Results similar to those cited for the metalworking industry have been found in other industries where PRP contracts are used. (This choice strengthens the conclusion – Eliminate it)

(B)Under PRP contracts costs other than labor costs, such as plant, machinery, and energy, make up an increased proportion of the total cost of each unit of output. (Irrelevant to argument PRP vs. productivity – Hold it)

(C)Because introducing PRP contracts greatly changes individual workers' relationships to the firm, negotiating the introduction of PRP contracts is complex and time consuming. (PRP introduction is irrelevant – eliminate it)

(D)Many firms in the metalworking industry have modernized production equipment in the last five years, and most of these introduced PRP contracts at the same time. (PRP contract and increase productivity – weakens the argument – hold it)

(E)In firms in the metalworking industry where PRP contracts are in place, the average take home pay is 15 % higher than it is in those firms where workers have more traditional contracts.(Average pay out of argument scope –eliminate it)

Answer: D
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Re: CR-FIRMS [#permalink]

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New post 26 Jan 2008, 01:50
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I agree it's D. Improved productivity might have resulted from the introduction of a new machinery.
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Re: CR-FIRMS [#permalink]

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New post 27 Jan 2008, 11:30
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D

The Assumption: there are no other reason of higher productivity in PRP-group.

D. Other reason: modernization of production equipment in the last five years
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Re: CR-FIRMS [#permalink]

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New post 17 Sep 2011, 07:21
I initially got this question wrong. And then, I revisited it a few days later when I wouldn't remember the answer or the choice I had made. And this time, although I did it without the timer, I got it right. Here is my analysis. Correction, my corrected analysis:

After reading the passage, it's fairly clear that the conclusion is present in the question and not the passage.
Conclusion: "PRP contracts increase worker productivity"

Now I asked myself, what could it be that weaken an argument that says PRP increases worker productivity.

After a bit of thinking, I realized there was a stark assumption being made.
Assumption: PRP is the only thing that increased worker productivity. Note that the question does not ask for this assumption. But it is essential to know it. This becomes especially clear when you read the choices. Let's review the answer choices:

A. Not even close. This strengthens the argument, if anything. Eliminate.
B. Well, this might seem tempting at first. But think about it, does any part of the conclusion refer to the increase in cost? No. Therefore, eliminate.
C. Now if you've eliminated the last one based on the idea that cost is not to be considered, then you're probably thinking if cost isn't a factor in the conclusion, why should complexity of negotiating the contract be one? So, eliminate.
D. Modernized equipment - This seems likely. Let's keep this for now.
E. Salaries of workers is somewhere close to costs and we're talking of productivity. This choice might confuse you since the passage itself revolves around "Profit-related-pay", but mind you, the conclusion has nothing to do with cost.

So, from our analysis, it seems like D was the only likely contender. Let's examine D closely.

There are two things about D. First, it targets the assumption I talked to you about earlier. Second, it says this equipment has been around 5 years and last saw better productivity. You might not even need to come to the second point, which could throw you off balance. The first point in D strikes the assumption that says "no other factor could be responsible". And therefore, I chose D.

Modernization could well have been the reason for increased productivity.
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Re: CR-FIRMS [#permalink]

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Re: Firms adopting "profit-related-pay"(PRP) contratcs [#permalink]

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New post 16 Sep 2013, 07:31
Option B somewhat weakens it but its D which is 100% weakening it(Gives a reason why the companies have increased productivity, not because of PRP but rather because of modern equipment).
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Re: CR-FIRMS [#permalink]

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New post 17 Sep 2013, 01:27
walker wrote:
D

The Assumption: there are no other reason of higher productivity in PRP-group.

D. Other reason: modernization of production equipment in the last five years


I can see why D is right .. I myself got it down to D and E .. but whats the problem with E ?
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Re: Firms adopting "profit-related-pay"(PRP) contratcs [#permalink]

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New post 16 Aug 2017, 09:07
stunn3r wrote:
walker wrote:
D

The Assumption: there are no other reason of higher productivity in PRP-group.

D. Other reason: modernization of production equipment in the last five years


I can see why D is right .. I myself got it down to D and E .. but whats the problem with E ?


Hi stunn3r,

I am happy to help! :)

Firms adopting "profit-related-pay"(PRP) contracts pay wages at levels that vary with the firm's profits. In the metal working industry last year, firms with PRP contracts in place showed productivity per worker on average 13 percent higher than that of their competitors who used more traditional contracts.

If, on the basis of the evidene above, it is argued that PRP contracts increase worker productivity, which of the following, if true, wud most seriously weaken the argument?

(D) Many firms in the metalworking industry have modernized production equipment in the last five years, and most of these introduced PRP contracts at the same time.
It provides another cause here. It is not the PRP contract, but the modernized production equipment which has increased the worker productivity. Therefore, correct.

(E) In firms in the metalworking industry where PRP contracts are in place, the average take home pay is 15 % higher than it is in those firms where workers have more traditional contracts.
This option is comparing the AVERAGE TAKE HOME PAY per worker of the firms where PRP contracts are in place and firms where workers have more traditional contracts. Can you tell me that knowing the average take home pay, does tells us anything about the productivity per worker on average? Is there a link ,which we can think of based on the information from the argument, between the average take home pay and the productivity per worker? The answer is NO, right?

We cannot answer the above questions based on the limited information from the argument. Therefore, Choice E is incorrect because it is not implausible that workers’ pay should roughly correspond to their productivity.

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Re: Firms adopting "profit-related-pay"(PRP) contratcs   [#permalink] 16 Aug 2017, 09:07
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