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Firms traditionally claim that they downsize (i.e., make permanent per

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Firms traditionally claim that they downsize (i.e., make permanent per  [#permalink]

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Firms traditionally claim that they downsize (i.e., make permanent personnel cuts) for economic reasons,laying off supposedly unnecessary staff in an attempt to become more efficient and competitive. Organization theory would explain this reasoning as an example of the “economic rationality” that it assumes underlies all organizational activities. There is evidence that firms believe they are behaving rationally whenever they downsize; yet recent research has shown that the actual economic effects of downsizing are often negative for firms. Thus, organization theory cannot adequately explain downsizing; non-economic factors must also be considered. One such factor is the evolution of downsizing into a powerful business myth: managers simply believe that downsizing is efficacious. Moreover, downsizing nowadays is greeted favorably by the business press; the press often refers to soaring stock prices of downsizing firms (even though research shows that stocks usually rise only briefly after downsizing and then suffer a prolonged decline). Once viewed as a sign of desperation, downsizing is now viewed as a signal that firms are serious about competing in the global marketplace; such signals are received positively by key actors—financial analysts, consultants, shareholders—who supply firms with vital organizing resources. Thus, even if downsizers do not become economically more efficient, downsizing’s mythic properties give them added prestige in the business community, enhancing their survival prospects.


1. According to the passage, the “key actors” view a firm’s downsizing activities as an indication of the firm’s

(A) troubled financial condition
(B) inability to develop effective long-term strategies
(C) inability to retain vital organizational resources
(D) desire to boost its stock price
(E) desire to become more competitive



2. The primary purpose of the passage is to

(A) criticize firms for engaging in the practice of downsizing
(B) analyze the negative economic impact of downsizing on firms
(C) offer an alternative to a traditional explanation for the occurrence of downsizing
(D) chronicle how perceptions of downsizing have changed over time
(E) provide evidence disputing the prevalence of downsizing



3. The passage suggests which of the following about the claim that a firm will become more efficient and competitive by downsizing?

(A) Few firms actually believe this claim to be true.
(B) Fewer firms have been making this claim in recent years.
(C) This claim contradicts the basic assumption of organization theory.
(D) This claim is called into question by certain recent research.
(E) This claim is often treated with skepticism by the business press.



4. The passage suggests that downsizing’s mythic properties can be beneficial to a downsizing firm because these properties

(A) allow the firm to achieve significant operating efficiencies
(B) provide the firm with access to important organizing resources
(C) encourage a long-term increase in the firm’s stock price
(D) make the firm less reliant on external figures such as financial analysts and consultants
(E) discourage the firm’s competitors from entering the global marketplace



5. The author would be most likely to agree that the treatment by the business press of changes in the stock prices of downsizing press of changes in the stock prices of downsizing firms is misleading because the press tends to

(A) focus excessively on the short-term stock price movement of downsizing firms while paying insufficient attention to the long term
(B) exaggerate the extent to which stock prices of downsizing firms rise in the short term
(C) exaggerate the link between long-term stock performance and the economic viability of downsizing firms
(D) misinterpret a long-term decline in the stock prices of downsizing firms as a sign of desperation
(E) underestimate the impact that the press itself can have on the stock prices of downsizing firms


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Originally posted by souvik101990 on 02 Jun 2016, 11:27.
Last edited by SajjadAhmad on 23 Aug 2019, 00:35, edited 3 times in total.
Updated - Complete topic (270).
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Re: Firms traditionally claim that they downsize (i.e., make permanent per  [#permalink]

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New post 27 Apr 2017, 09:19
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Actually a reasonably interesting passage! And if you disagree, take some advice from a friend of mine: whenever you read RC, pretend that somebody you find incredibly attractive is reading this passage to you. Lol.

Anyway, whenever I start reading an RC passage, my main goal is to understand the structure of the argument. Why is each part of this passage there? I don't really give a crap about the details yet -- they'll be on the screen if I need them. I mostly just want to know how the author is constructing his or her argument.

This particular passage is a one-paragraph blob, but there's still some structure here. Let's break this sucker down sequentially -- since we'll need to understand the structure if we want to dive into the passage's primary purpose:
Quote:
Firms traditionally claim that they downsize (i.e., make permanent personnel cuts) for economic reasons,laying off supposedly unnecessary staff in an attempt to become more efficient and competitive. Organization theory would explain this reasoning as an example of the “economic rationality” that it assumes underlies all organizational activities. There is evidence that firms believe they are behaving rationally whenever they downsize; yet...


The author is just telling us about firms' traditional claims of downsizing in these first few sentences, and how it connects to organizational theory. And then the word "yet" catches my eye. Looks like we're heading for some sort of counter-claim...

Quote:
... yet recent research has shown that the actual economic effects of downsizing are often negative for firms. Thus, organization theory cannot adequately explain downsizing; non-economic factors must also be considered.


That's nice and clear: the author is saying that firms' traditional claim -- that downsizing is economically rational -- isn't really the whole story, and that we need to consider non-economic factors. This seems like a really, really key part of the passage. Continuing...

Quote:
One such factor is the evolution of downsizing into a powerful business myth: managers simply believe that downsizing is efficacious.Moreover, downsizing nowadays is greeted favorably by the business press; the press often refers to soaring stock prices of downsizing firms (even though research shows that stocks usually rise only briefly after downsizing and then suffer a prolonged decline).Once viewed as a sign of desperation, downsizing is now viewed as a signal that firms are serious about competing in the global marketplace;such signals are received positively by key actors—financial analysts, consultants, shareholders—who supply firms with vital organizing resources. Thus, even if downsizers do not become economically more efficient, downsizing’s mythic properties give them added prestige in the business community, enhancing their survival prospects.


And here we have an explanation of the non-economic factors: downsizing is "greeted favorably by the business press", it is "viewed positively by key actors", and its "mythic properties give [firms] added prestige in the business community." So even though downsizers don't become more economically efficient, there's a "powerful business myth" surrounding downsizing -- and that confers benefits to firms.

To summarize, the passage proceeds in this order:
    1) describes the traditional claim firms make about downsizing -- it's economically rational, as suggested by organization theory
    2) pivot: since economic consequences are negative, organization theory can't explain downsizing; need to consider non-economic factors
    3) explains those non-economic factors ("mythic properties give firms added prestige", etc.)

On to your questions:

Quote:
2) The primary purpose of the passage is to
A. criticize firms for engaging in the practice of downsizing
B. analyze the negative economic impact of downsizing on firms
C. offer an alternative to a traditional explanation for the occurrence of downsizing
D. chronicle how perceptions of downsizing have changed over time
E. provide evidence disputing the prevalence of downsizing

OA:C , Could you please explain why not B?


Only a small sliver of the passage deals with the negative economic impact of downsizing, and there's really no analysis of the negative economic impact itself. It's only mentioned as evidence to debunk firms' traditional claims for the purpose of downsizing. The rest of the passage goes on to explain the real reasons for downsizing.

Quote:
Hi, can someone please just briefly give an idea why primary purpose is not D? I almost always get the primary purpose incorrect :(


There's really no mention of how perceptions of downsizing have changed over time. Sure, the passage references perceptions of downsizing -- the business press, for example, seems to love downsizing -- but those perceptions don't really change over time. Instead, the passage is focused on the alternative ("non-economic") reasons why firms downsize.

Quote:
3) The passage suggests which of the following about the
claim that a firm will become more efficient and
competitive by downsizing?
A. Few firms actually believe this claim to be true.
B. Fewer firms have been making this claim in recent years.
C. This claim contradicts the basic assumption of organization theory.
D. This claim is called into question by certain recent research.
E. This claim is often treated with skepticism by the business press.

Could you please explain why not B?


The passage mentions that the traditional claim (that downsizing leads to efficiency) is wrong, and discusses why firms nevertheless choose to downsize. There's no indication that firms have changed their behavior: "There is evidence that firms believe they are behaving rationally whenever they downsize... managers simply believe that downsizing is efficacious." Notice that both of these statements are in the present tense, so firms presumably still believe that downsizing leads to greater efficiency. ("Efficacious" is basically a pretentious synonym for "effective.")

Quote:
4)The passage suggests that downsizing’s mythic
properties can be beneficial to a downsizing firm
because these properties
A. allow the firm to achieve significant operating efficiencies
B. provide the firm with access to important organizing resources
C. encourage a long-term increase in the firm’s stock price
D. make the firm less reliant on external figures such as financial analysts and consultants
E. discourage the firm’s competitors from entering the global marketplace

OA:B Why not C?


(C) is directly contradicted by the passage:

Quote:
the press often refers to soaring stock prices of downsizing firms (even though research shows that stocks usually rise only briefly after downsizing and then suffer a prolonged decline)


Happy reading, everybody!
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Re: Firms traditionally claim that they downsize (i.e., make permanent per  [#permalink]

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New post 25 Apr 2017, 20:07
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Hi GMATNinja,

2) The primary purpose of the passage is to
A. criticize firms for engaging in the practice of downsizing
B. analyze the negative economic impact of downsizing on firms
C. offer an alternative to a traditional explanation for the occurrence of downsizing
D. chronicle how perceptions of downsizing have changed over time
E. provide evidence disputing the prevalence of downsizing

OA:C , Could you please explain why not B?
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Re: Firms traditionally claim that they downsize (i.e., make permanent per  [#permalink]

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New post 25 Apr 2017, 20:23
Hi souvik101990 / GMATNinja / mikemcgarry,

3) The passage suggests which of the following about the
claim that a firm will become more efficient and
competitive by downsizing?
A. Few firms actually believe this claim to be true.
B. Fewer firms have been making this claim in recent years.
C. This claim contradicts the basic assumption of organization theory.
D. This claim is called into question by certain recent research.
E. This claim is often treated with skepticism by the business press.

Could you please explain why not B?

4)The passage suggests that downsizing’s mythic
properties can be beneficial to a downsizing firm
because these properties
A. allow the firm to achieve significant operating efficiencies
B. provide the firm with access to important organizing resources
C. encourage a long-term increase in the firm’s stock price
D. make the firm less reliant on external figures such as financial analysts and consultants
E. discourage the firm’s competitors from entering the global marketplace

OA:B Why not C?
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Re: Firms traditionally claim that they downsize (i.e., make permanent per  [#permalink]

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New post 27 Apr 2017, 05:18
1
soa7 wrote:
Hi, can someone please just briefly give an idea why primary purpose is not D? I almost always get the primary purpose incorrect :(


"Firms traditionally claim that they downsize for economic reasons"
Then is there is a lot of details

"non-economic factors must also be considered"
Details follows

Hence The primary purpose is to offer an alternative to a traditional explanation for the occurrence of downsizing
Hope its clear
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Re: Firms traditionally claim that they downsize (i.e., make permanent per  [#permalink]

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New post 27 Apr 2017, 10:11
Thank you for the detailed explanation GMATNinja! It's very clear now. :-D
I do not have any strategy in place for RC. I will practice concentrating more on the structure and see how my primary purpose questions go.
Thank you for the tip :thumbup:
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Re: Firms traditionally claim that they downsize (i.e., make permanent per  [#permalink]

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New post 07 May 2017, 03:33
GMATNinja wrote:
On to your questions:

Quote:
2) The primary purpose of the passage is to
A. criticize firms for engaging in the practice of downsizing
B. analyze the negative economic impact of downsizing on firms
C. offer an alternative to a traditional explanation for the occurrence of downsizing
D. chronicle how perceptions of downsizing have changed over time
E. provide evidence disputing the prevalence of downsizing

OA:C , Could you please explain why not B?


Only a small sliver of the passage deals with the negative economic impact of downsizing, and there's really no analysis of the negative economic impact itself. It's only mentioned as evidence to debunk firms' traditional claims for the purpose of downsizing. The rest of the passage goes on to explain the real reasons for downsizing.

Quote:
Hi, can someone please just briefly give an idea why primary purpose is not D? I almost always get the primary purpose incorrect :(


There's really no mention of how perceptions of downsizing have changed over time. Sure, the passage references perceptions of downsizing -- the business press, for example, seems to love downsizing -- but those perceptions don't really change over time. Instead, the passage is focused on the alternative ("non-economic") reasons why firms downsize.



Hi GMATNinja

While I agree with the OA, even I was a bit doubtful between choices C and D on the CAT. While the passage does not definitely "chronicle" the changing perceptions over time, there is some time linkage as seen here:

- Moreover, downsizing nowadays is greeted favorably by the business press;...
- Once viewed as a sign of desperation, downsizing is now viewed as a signal that firms are serious about competing...

Let us know your views.
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Re: Firms traditionally claim that they downsize (i.e., make permanent per  [#permalink]

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New post 08 May 2017, 11:29
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Quote:
While I agree with the OA, even I was a bit doubtful between choices C and D on the CAT. While the passage does not definitely "chronicle" the changing perceptions over time, there is some time linkage as seen here:

- Moreover, downsizing nowadays is greeted favorably by the business press;...
- Once viewed as a sign of desperation, downsizing is now viewed as a signal that firms are serious about competing...

Let us know your views.


I think you mostly answered your own question, shailabh! Sure, there are a few time references in the passage, but it's definitely an overstatement to say that the passage "chronicles" the perspectives of downsizing over time. And more importantly, it definitely isn't the primary purpose of the passage.

The tempting "trap answers" on RC primary purpose questions often look a little bit like this one: sure, the passage uses "time markers" when talking about downsizing, but the changes over time certainly aren't at the heart of the passage.

I hope this helps!
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Re: Firms traditionally claim that they downsize (i.e., make permanent per  [#permalink]

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New post 05 Jun 2017, 03:29
I missed the second question, as got trapped in option D -
I missed the core of the argument also.
2) The primary purpose of the passage is to
A. criticize firms for engaging in the practice of downsizing
B. analyze the negative economic impact of downsizing on firms
C. offer an alternative to a traditional explanation for the occurrence of downsizing
D. chronicle how perceptions of downsizing have changed over time
E. provide evidence disputing the prevalence of downsizing
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Re: Firms traditionally claim that they downsize (i.e., make permanent per  [#permalink]

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New post 05 Nov 2017, 08:03
This passage has one more question.
souvik101990 please incorporate it in the original post.
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Re: Firms traditionally claim that they downsize (i.e., make permanent per  [#permalink]

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New post 16 Feb 2018, 03:49
Got 1 incorrect -10 mins including reading and solving.

GMATNinja , GMATNinja2
Kindly explain Ques.4->

4)The passage suggests that downsizing’s mythic
properties can be beneficial to a downsizing firm
because these properties
A. allow the firm to achieve significant operating efficiencies
B. provide the firm with access to important organizing resources
C. encourage a long-term increase in the firm’s stock price
D. make the firm less reliant on external figures such as financial analysts and consultants
E. discourage the firm’s competitors from entering the global marketplace


Thanks
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Re: Firms traditionally claim that they downsize (i.e., make permanent per  [#permalink]

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New post 01 Mar 2018, 14:31
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sahilvijay wrote:
Got 1 incorrect -10 mins including reading and solving.

GMATNinja , GMATNinja2
Kindly explain Ques.4->

4)The passage suggests that downsizing’s mythic
properties can be beneficial to a downsizing firm
because these properties
A. allow the firm to achieve significant operating efficiencies
B. provide the firm with access to important organizing resources
C. encourage a long-term increase in the firm’s stock price
D. make the firm less reliant on external figures such as financial analysts and consultants
E. discourage the firm’s competitors from entering the global marketplace


Thanks

sahilvijay, sorry for the delay!

We are told that "organization theory cannot adequately explain downsizing; non-economic factors must also be considered." In other words, if you want to explain downsizing, you need to look at non-economic factors.

Refer to the following portion of an earlier post,
GMATNinja wrote:
And here we have an explanation of the non-economic factors: downsizing is "greeted favorably by the business press", it is "viewed positively by key actors", and its "mythic properties give [firms] added prestige in the business community." So even though downsizers don't become more economically efficient, there's a "powerful business myth" surrounding downsizing -- and that confers benefits to firms.

So what is the "myth"? Well, we are told that "the actual economic effects of downsizing are often negative for firms" and that stock prices of downsizing firms usually "suffer a prolonged decline" after downsizing. But despite the economic evidence, downsizing gives a firm "added prestige in the business community", and sends the signal that the firm is "serious about competing in the global marketplace."

In other words, despite the evidence, downsizing is viewed favorably. That is why the author refers to "the evolution of downsizing into a powerful business myth."

Well, so what? Downsizing might now be viewed favorably, but what good does that actually do for the company? The key to question #4 lies in this portion:

Quote:
downsizing is now viewed as a signal that firms are serious about competing in the global marketplace; such signals are received positively by key actors—financial analysts, consultants, shareholders—who supply firms with vital organizing resources


Ah ha... the favorable view of downsizing might stem from a myth, but the resulting signals are received positively by key actors. These key actors supply firms with vital organizing resources. So, because of the weight of the "mythic properties", downsizing might improve a firm's access to those "vital organizing resources".

Choice (B) accurately describes this benefit.
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Re: Firms traditionally claim that they downsize (i.e., make permanent per  [#permalink]

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New post 30 May 2018, 04:43
GMATNinja wrote:
Quote:
... yet recent research has shown that the actual economic effects of downsizing are often negative for firms. Thus, organization theory cannot adequately explain downsizing; non-economic factors must also be considered.


That's nice and clear: the author is saying that firms' traditional claim -- that downsizing is economically rational -- isn't really the whole story, and that we need to consider non-economic factors. This seems like a really, really key part of the passage. Continuing...

This is what threw me off. The "author" is not really saying this.

He is just citing a "research" that is saying this.

For primary purpose of the passage question, the answer is: offer an alternative to a traditional explanation for the occurrence of downsizing

I would have been more comfortable, had the answer been: cite a research offering an alternative to a traditional explanation for the occurrence of downsizing
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New post 14 Apr 2019, 04:46
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abhinashgc wrote:
GMATNinja Could you please explain why Q5 answer is A??
Thanks

Here is the question stem for question #5: "The author would be most likely to agree that the treatment by the business press of changes in the stock prices of downsizing firms is misleading because the press tends to..."

Let's look at what the passage has to say about how the press treats downsizing firms:
Quote:
Moreover, downsizing nowadays is greeted favorably by the business press; the press often refers to soaring stock prices of downsizing firms (even though research shows that stocks usually rise only briefly after downsizing and then suffer a prolonged decline).

From this, we know that the press treats these firms "favorably" by focusing on "soaring stock prices."

The author goes on to say that downsizing firms receive this friendly treatment "even though research shows that stocks usually rise only briefly after downsizing and then suffer a prolonged decline." So, the author thinks that the press focuses on the short-term rise in stock prices, and ignores the "prolonged decline" in prices that usually follows.

Now, look at answer choice (A):
Quote:
(A) focus excessively on the short-term stock price movement of downsizing firms while paying insufficient attention to the long term

This answer choice closely mirrors the relevant piece of the passage -- the "short-term movement in stock price" refers to the initial "soaring stock prices" when a company downsizes, and the "long term" referenced in the answer choice refers to the "prolonged decline" mentioned in the passage. (A) is the correct answer for question #5.

I hope that helps!
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Re: Firms traditionally claim that they downsize (i.e., make permanent per  [#permalink]

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New post 09 Jul 2019, 23:28
GMATNinja wrote:
Actually a reasonably interesting passage! And if you disagree, take some advice from a friend of mine: whenever you read RC, pretend that somebody you find incredibly attractive is reading this passage to you. Lol.

Anyway, whenever I start reading an RC passage, my main goal is to understand the structure of the argument. Why is each part of this passage there? I don't really give a crap about the details yet -- they'll be on the screen if I need them. I mostly just want to know how the author is constructing his or her argument.

This particular passage is a one-paragraph blob, but there's still some structure here. Let's break this sucker down sequentially -- since we'll need to understand the structure if we want to dive into the passage's primary purpose:
Quote:
Firms traditionally claim that they downsize (i.e., make permanent personnel cuts) for economic reasons,laying off supposedly unnecessary staff in an attempt to become more efficient and competitive. Organization theory would explain this reasoning as an example of the “economic rationality” that it assumes underlies all organizational activities. There is evidence that firms believe they are behaving rationally whenever they downsize; yet...


The author is just telling us about firms' traditional claims of downsizing in these first few sentences, and how it connects to organizational theory. And then the word "yet" catches my eye. Looks like we're heading for some sort of counter-claim...

Quote:
... yet recent research has shown that the actual economic effects of downsizing are often negative for firms. Thus, organization theory cannot adequately explain downsizing; non-economic factors must also be considered.


That's nice and clear: the author is saying that firms' traditional claim -- that downsizing is economically rational -- isn't really the whole story, and that we need to consider non-economic factors. This seems like a really, really key part of the passage. Continuing...

Quote:
One such factor is the evolution of downsizing into a powerful business myth: managers simply believe that downsizing is efficacious.Moreover, downsizing nowadays is greeted favorably by the business press; the press often refers to soaring stock prices of downsizing firms (even though research shows that stocks usually rise only briefly after downsizing and then suffer a prolonged decline).Once viewed as a sign of desperation, downsizing is now viewed as a signal that firms are serious about competing in the global marketplace;such signals are received positively by key actors—financial analysts, consultants, shareholders—who supply firms with vital organizing resources. Thus, even if downsizers do not become economically more efficient, downsizing’s mythic properties give them added prestige in the business community, enhancing their survival prospects.


And here we have an explanation of the non-economic factors: downsizing is "greeted favorably by the business press", it is "viewed positively by key actors", and its "mythic properties give [firms] added prestige in the business community." So even though downsizers don't become more economically efficient, there's a "powerful business myth" surrounding downsizing -- and that confers benefits to firms.

To summarize, the passage proceeds in this order:
    1) describes the traditional claim firms make about downsizing -- it's economically rational, as suggested by organization theory
    2) pivot: since economic consequences are negative, organization theory can't explain downsizing; need to consider non-economic factors
    3) explains those non-economic factors ("mythic properties give firms added prestige", etc.)

On to your questions:

Quote:
2) The primary purpose of the passage is to
A. criticize firms for engaging in the practice of downsizing
B. analyze the negative economic impact of downsizing on firms
C. offer an alternative to a traditional explanation for the occurrence of downsizing
D. chronicle how perceptions of downsizing have changed over time
E. provide evidence disputing the prevalence of downsizing

OA:C , Could you please explain why not B?


Only a small sliver of the passage deals with the negative economic impact of downsizing, and there's really no analysis of the negative economic impact itself. It's only mentioned as evidence to debunk firms' traditional claims for the purpose of downsizing. The rest of the passage goes on to explain the real reasons for downsizing.

Quote:
Hi, can someone please just briefly give an idea why primary purpose is not D? I almost always get the primary purpose incorrect :(


There's really no mention of how perceptions of downsizing have changed over time. Sure, the passage references perceptions of downsizing -- the business press, for example, seems to love downsizing -- but those perceptions don't really change over time. Instead, the passage is focused on the alternative ("non-economic") reasons why firms downsize.

Quote:
3) The passage suggests which of the following about the
claim that a firm will become more efficient and
competitive by downsizing?
A. Few firms actually believe this claim to be true.
B. Fewer firms have been making this claim in recent years.
C. This claim contradicts the basic assumption of organization theory.
D. This claim is called into question by certain recent research.
E. This claim is often treated with skepticism by the business press.

Could you please explain why not B?


The passage mentions that the traditional claim (that downsizing leads to efficiency) is wrong, and discusses why firms nevertheless choose to downsize. There's no indication that firms have changed their behavior: "There is evidence that firms believe they are behaving rationally whenever they downsize... managers simply believe that downsizing is efficacious." Notice that both of these statements are in the present tense, so firms presumably still believe that downsizing leads to greater efficiency. ("Efficacious" is basically a pretentious synonym for "effective.")

Quote:
4)The passage suggests that downsizing’s mythic
properties can be beneficial to a downsizing firm
because these properties
A. allow the firm to achieve significant operating efficiencies
B. provide the firm with access to important organizing resources
C. encourage a long-term increase in the firm’s stock price
D. make the firm less reliant on external figures such as financial analysts and consultants
E. discourage the firm’s competitors from entering the global marketplace

OA:B Why not C?


(C) is directly contradicted by the passage:

Quote:
the press often refers to soaring stock prices of downsizing firms (even though research shows that stocks usually rise only briefly after downsizing and then suffer a prolonged decline)


Happy reading, everybody!


For question 3, the research is contradicting that downsizing doesnt help "economically" it never says that downsizing is not helping cos efficiency and say that firm will not be competitive with downsizing. infact after the result of the research the author goes on to explain that there could be other factors that could be deemed "significant" apart from economics.

Please clarify
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Re: Firms traditionally claim that they downsize (i.e., make permanent per  [#permalink]

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New post 18 Jul 2019, 19:58
Mudit27021988 wrote:
GMATNinja wrote:
...
Quote:
3) The passage suggests which of the following about the
claim that a firm will become more efficient and
competitive by downsizing?
A. Few firms actually believe this claim to be true.
B. Fewer firms have been making this claim in recent years.
C. This claim contradicts the basic assumption of organization theory.
D. This claim is called into question by certain recent research.
E. This claim is often treated with skepticism by the business press.

Could you please explain why not B?


The passage mentions that the traditional claim (that downsizing leads to efficiency) is wrong, and discusses why firms nevertheless choose to downsize. There's no indication that firms have changed their behavior: "There is evidence that firms believe they are behaving rationally whenever they downsize... managers simply believe that downsizing is efficacious." Notice that both of these statements are in the present tense, so firms presumably still believe that downsizing leads to greater efficiency. ("Efficacious" is basically a pretentious synonym for "effective.")

...


For question 3, the research is contradicting that downsizing doesnt help "economically" it never says that downsizing is not helping cos efficiency and say that firm will not be competitive with downsizing. infact after the result of the research the author goes on to explain that there could be other factors that could be deemed "significant" apart from economics.

Please clarify

Let's start with the first sentence of the passage: "Firms traditionally claim that they downsize (i.e., make permanent personnel cuts) for economic reasons, laying off supposedly unnecessary staff in an attempt to become more efficient and competitive."

From this sentence, we can infer that becoming more efficient/competitive IS an economic reason for downsizing, according to the traditional claim. So when the passage later tells us that "recent research has shown that the actual economic effects of downsizing are often negative for firms", this suggests that downsizing actually hurts a firm's efficiency and competitiveness.

So the passage suggests that the traditional claim is called into question by certain recent research.

Remember, the question specifically uses the word "suggests", so we are not looking for something that is explicitly stated in the passage or something that must be true. (D) is the best answer choice.

I hope this helps!
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Beginners' guides to GMAT verbal: RC | CR | SC

YouTube LIVE verbal webinars: Series 1: Fundamentals of SC & CR | Series 2: Developing a Winning GMAT Mindset

SC articles & resources: How to go from great (760) to incredible (780) on GMAT SC | That "-ing" Word Probably Isn't a Verb | That "-ed" Word Might Not Be a Verb, Either | No-BS Guide to GMAT Idioms | "Being" is not the enemy | WTF is "that" doing in my sentence?

RC, CR, and other articles & resources: All GMAT Ninja articles on GMAT Club | Using LSAT for GMAT CR & RC |7 reasons why your actual GMAT scores don't match your practice test scores | How to get 4 additional "fake" GMAT Prep tests for $29.99 | Time management on verbal

SC & CR Questions of the Day (QOTDs), featuring expert explanations: All QOTDs | Subscribe via email | RSS

Need an expert reply? Hit the request verbal experts' reply button; be specific about your question, and tag @GMATNinja. Priority is always given to official GMAT questions.
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Re: Firms traditionally claim that they downsize (i.e., make permanent per   [#permalink] 18 Jul 2019, 19:58
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