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A is the answer it clearly says that the profits would be wiped out due to an initial investment .Therefore the telephone companies cannot provide channels at a subsidized rate !!
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1990 editorial: Local pay phone calls have cost a quarter apiece ever since the 1970s, when a soft drink from a vending machine cost about the same. The price of a soft drink has more than doubled since, so phone companies should be allowed to raise the price of pay phone calls too.

Which one of the following, if true, most weakens the editorial's argument?

(A) A pay phone typically cost less than a soft-drink machine in the 1970s.
(B) Due to inflation, the prices of most goods more than doubled between the 1970s and 1990.
(C) Government regulation of phone call prices did not become more stringent between the 1970s and 1990.
(D) Between the 1970s and 1990 the cost of ingredients for soft drinks increased at a greater rate than the cost of telephone equipment.
(E) Technological advances made telephone equipment more sophisticated between the 1970s and 1990.
(A) A pay phone typically cost less than a soft-drink machine in the 1970s. - OFS

(B) Due to inflation, the prices of most goods more than doubled between the 1970s and 1990. - gives an alternative reason for the increase in the price of soft drinks

(C) Government regulation of phone call prices did not become more stringent between the 1970s and 1990.
- irrelevant
(D) Between the 1970s and 1990 the cost of ingredients for soft drinks increased at a greater rate than the cost of telephone equipment. - kind of trap "rate of increase"

(E) Technological advances made telephone equipment more sophisticated between the 1970s and 1990
- irrelevant

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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.

Which of the following, if true, would ease the cable companies’ fear of unfair competition?


(A) In order to use existing telephone wire, telephone companies would need to modernize their operations, a process so expensive it would virtually wipe out all profit from their monopoly for the foreseeable future.

(B) If a phone company were to offer cable service within a particular area, it would have a monopoly within that area.

(C) The cost of television service, whether provided by cable or telephone companies, scales; that is, the total cost of transmission rises only marginally as more homes are added to the network.

(D) Cable programming that offers more channels is already available through satellite dish, but the initial cost of the dish is extremely high.

(E) Cable television will never be able to compete with the burgeoning video rental industry, especially as more homes now have video cassette recorders than ever did before.

TWIN QUESTION: https://gmatclub.com/forum/local-phone- ... 12989.html
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(A) "In order to use existing telephone wire, telephone companies would need to modernize their operations, a process so expensive it would virtually wipe out all profit from their monopoly for the foreseeable future." - This option directly addresses the cable companies' fear. If the telephone companies have to spend a significant amount of money to modernize their operations before they can offer cable services, the high cost of modernization would offset the profits they make from their phone service monopoly. As a result, they wouldn't be able to subsidize their cable service with profits from their phone service. This would eliminate the unfair competitive advantage, thereby easing the cable companies' fear.

(D) "Cable programming that offers more channels is already available through satellite dish, but the initial cost of the dish is extremely high." - This statement discusses an alternative to cable but doesn't directly address the fear of unfair competition between telephone and cable companies. It doesn't impact the cable companies' concern about subsidies.
(E) "Cable television will never be able to compete with the burgeoning video rental industry, especially as more homes now have video cassette recorders than ever did before." - This statement discusses competition with the video rental industry, which is unrelated to the specific issue of telephone companies entering the cable service market. It doesn't address the fear of unfair competition between telephone and cable companies.

(A) is the correct answer because it directly mitigates the cable companies' concern about unfair competition by showing that the telephone companies wouldn't have the excess profits from their phone service monopoly to subsidize their cable services due to the high costs of modernization.
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