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Industry analysts feel that Bluecorp paid far too much to acquire riva

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Industry analysts feel that Bluecorp paid far too much to acquire riva  [#permalink]

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New post 17 Sep 2018, 02:18
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A
B
C
D
E

Difficulty:

  15% (low)

Question Stats:

93% (01:24) correct 7% (01:16) wrong based on 57 sessions

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Industry analysts feel that Bluecorp paid far too much to acquire rival firm Strickland. While doing so limited competition they face in the marketplace, this approach cannot be profitable in the long run. Once two rival firms merge in order to increase profits, the higher prices would only provide other competitors an opportunity to enter the field at a lower price, cutting into Bluecorp’s profits and making the acquisition of Strickland an expensive mistake.

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


(A) In some countries it is legal for two companies to merge even if the resulting entity would nearly monopolize the market.

(B) The combination of Bluecorp and Strickland creates an entity whose size allows it to produce items at a far lower cost than could any smaller enterprise.

(C) In addition to eliminating competition, Bluecorp's acquisition gives it a much more substantial presence in urban areas.

(D) As a result of the acquisition, the new corporate entity will create two smaller entities to operate as independent suppliers to Bluecorp.

(E) When two large companies in the same field combine, entrepreneurs tend to shy away from the field due to the single entity’s perceived dominance.

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Re: Industry analysts feel that Bluecorp paid far too much to acquire riva  [#permalink]

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New post 17 Sep 2018, 02:40
Awesome question this one...Struggled a lot between B and E....

My take on this question...

We have to clearly know what the conclusion is in order to solve this question

Conclusion = “profits will fall hence cannot survive for long”

E = incorrect because it is stating something going against the premise.We have to remember that premise are correct statements

B = correct.Telling us that they can reduce costs and still be profitable.

Fingers ? on this question

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Industry analysts feel that Bluecorp paid far too much to acquire riva  [#permalink]

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New post 18 Sep 2018, 02:10
Here is my take on this question.

Industry analysts feel that Bluecorp paid far too much to acquire rival firm Strickland. While doing so limited competition they face in the marketplace, this approach cannot be profitable in the long run. Once two rival firms merge in order to increase profits, the higher prices would only provide other competitors an opportunity to enter the field at a lower price, cutting into Bluecorp’s profits and making the acquisition of Strickland an expensive mistake.

Conclusion: The approach of Bluecorps will not be profitable in a long run because once two firms merge to increase profits, the higher prices give opportunity for other competitors to enter the market with a lower price. This move will cut down the profits of Bluecorps and the acquisition will be an expensive mistake.

Inorder to increase the profits, Bluecrops have to introduce products at lower prices and it blocks opportunities available in the market for other competitors.

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

(A) In some countries it is legal for two companies to merge even if the resulting entity would nearly monopolize the market.
Explanation: IRRELEVANT

(B) The combination of Bluecorp and Strickland creates an entity whose size allows it to produce items at a far lower cost than could any smaller enterprise.
Explanation:It's possible for Bluecorps to drive profits if the acquisition will help Bluecorp to produce items at lower cost because by this way, company can sell their products at a competitive price. - CORRECT

(C) In addition to eliminating competition, Bluecorp's acquisition gives it a much more substantial presence in urban areas.
Explanation: Presence only in Urban areas will not determine whether Bluecorps is going to drive profits. - INCORRECT

(D) As a result of the acquisition, the new corporate entity will create two smaller entities to operate as independent suppliers to Bluecorp.
Explanation: IRRELEVANT

(E) When two large companies in the same field combine, entrepreneurs tend to shy away from the field due to the single entity’s perceived dominance.
Explanation: Entrepreneurs who sell their products at lower prices will compete while the ones who sell at higher prices will not be a competitor or vice versa depending on the company's products. Hence it's only a partial answer. - INCORRECT

Hence IMO B
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Industry analysts feel that Bluecorp paid far too much to acquire riva &nbs [#permalink] 18 Sep 2018, 02:10
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Industry analysts feel that Bluecorp paid far too much to acquire riva

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