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# Local phone companies have monopolies on phone service

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Manager
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Local phone companies have monopolies on phone service [#permalink]

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18 Nov 2008, 02:16
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Local phone companies have monopolies on phone service within their areas. Cable television can be transmitted via the wires that are already in place and owned by the phone companies. Cable television companies argue that if the telephone companies were to offer cable service, these telephone companies would have an unfair advantage, because their cable transmissions could be subsidized by the profits of their monopolies on phone service.

16.On the basis of the information provided in the passage above, which of the following questions can be answered?
(A) Are phone companies as efficient as cable companies in providing reliable and inexpensive service?
(B) If phone companies were allowed to provide cable service, would they want to do so?
(C) Do the cable companies believe that the local phone companies make a profit on phone service?
(D) Are local phone companies forbidden to offer cable service?
(E) Is it expected that phone companies will have a monopoly on cable service?

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Intern
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Re: CR: Gmat verbal Sets #16 [#permalink]

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18 Nov 2008, 09:30
E ...!

Not very sure though.

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Re: CR: Gmat verbal Sets #16 [#permalink]

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18 Nov 2008, 10:18
C

prasun84 wrote:
Local phone companies have monopolies on phone service within their areas. Cable television can be transmitted via the wires that are already in place and owned by the phone companies. Cable television companies argue that if the telephone companies were to offer cable service, these telephone companies would have an unfair advantage, because their cable transmissions could be subsidized by the profits of their monopolies on phone service.

16.On the basis of the information provided in the passage above, which of the following questions can be answered?
(A) Are phone companies as efficient as cable companies in providing reliable and inexpensive service?
The passage implies that phone companies are inefficient, will not be profitable and will subsidize this service from profits from their phone business, but we cannot answer this question with certainty.

(B) If phone companies were allowed to provide cable service, would they want to do so?
The passage doesn't mention whether they want to. The author speculates about IF the phone companies do provide this service. Answering this question requires information beyond the scope of the passage provided.

(C) Do the cable companies believe that the local phone companies make a profit on phone service?

This is not making a statement, or asking a question outside the scope. When you read "believe" you can think "assumption". The author states that the phone companies would subsidize cable service with phone profits. The only way this makes sense is if the author believes (or assumes) there is profit there to use as a subsidy. This is the correct answer.

(D) Are local phone companies forbidden to offer cable service?
Way beyond the scope. Don't be tempted to bring in any knowledge about unfair advantages having to do with anti-trust and being forbidden to operate a business in one area becasue of unfair trade practices. This is beyond the scope and only plausible if you bring in outside knowledge.

(E) Is it expected that phone companies will have a monopoly on cable service?
The only way the author gets close to this is by implication. The author states the phone companies would have an "unfair advantage" but this question goes a step further and asks about a monopoly on cable service. If the passage talks about more than 1 comapny offering cable service, can there possibly be a monopoly by one of the companies? No, that would vioate the definition of a MONOPOLY.

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Re: CR: Gmat verbal Sets #16 [#permalink]

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18 Nov 2008, 10:58
C for me

cable transmissions could be subsidized by the profits of their monopolies on phone service

What CC are thinking is that because TC have monopolies on phone service and have infrastructure in place for CC transmission, they can subsidize the rates for CT and drive CC out of market. For CC to say this, they must believe that TC have monopoly on phone service and they do make profits.

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Re: CR: Gmat verbal Sets #16 [#permalink]

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18 Nov 2008, 15:42
i would go with B..

if cable companies are capable of doing so why havent they done it yet? maybe its too costly?

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Re: CR: Gmat verbal Sets #16 [#permalink]

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18 Nov 2008, 16:08
B for me too ...

C is close but we cannot conclude anything about profits ... its quite possible that even after having monopoly there is no profit

BUT on the other hand B requires a bit of assumption too ....

so confused between B and C

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Re: CR: Gmat verbal Sets #16 [#permalink]

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19 Nov 2008, 04:35
OA is C.
I was even confused between B and C, and E i think is the ugly answer which might catch many of us unaware.
no OE guys..but heres my take on it...

(B)nowhere in the passage does the author leans towards Phone companies or any speculation whether they might indulge in cable service.the fact that Phone companies have monopolies is only used to render support to the Cable companies claims.
(C)because their cable transmissions could be subsidized by the profits of their monopolies on phone service..If the cable compnaies dont believe that the phone compnaies are making profits, the conclusion falls apart.

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Re: CR: Gmat verbal Sets #16   [#permalink] 19 Nov 2008, 04:35
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