TWIN QUESTION: https://gmatclub.com/forum/local-phone- ... 26237.html
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Great question !!!
Stem of the question is very unique---- We have to look for an answer choice that we can know certainly to be true post reading the argument (Inference)


(A) Are phone companies as efficient as cable companies in providing reliable and inexpensive service?
No where mentioned in the argument. We cant answer this question with certainty post reading the argument

(B) If phone companies were allowed to provide cable service, would they want to do so? Irrelevant


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

Yes we can answer this with certainty as the cable companies believe that profits generated from monopoly of the phone companies would be an unfair advantage to phone companies


(D) Are local phone companies forbidden to offer cable service? We dont know, irrelevant


(E) Is it expected that phone companies will have a monopoly on cable service? EXPECTATIONS ABOUT FUTURE OR PAST EVENTS ARE NOT INFERENCES


C should cut it
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Since this question resembles the "Must Be true" question type , we take for granted all the information provided in the text,ShankSouljaBoi already explained the question thoroughly , I will just add a small resume of the information :


"Local phone companies have monopolies" + "they can use the same cable to transmit cable television " = " cable television companies conclude that telephone companies have unfair advantage because the phone companies already make a profit in the phone sector "

The correct answer is Option C.

Lets first analyze the passage:

- Local phone companies have monopolies on phone service -> they do not have competition as far as providing phone service is concerned
- Cable TV can be transmitted using the same wires already in place for phones (owned by phone companies) -> phone companies have the infra to possibly enter the Cable TV market
- Cable TV companies:
> if telephone companies entered the Cable TV market, they would have an unfair advantage
> Because - they can subsidize their cable transmissions by the profits made thanks to the monopolies in phone service (i.e. they can sell cable service at a much cheaper rate, because they will be able to absorb the difference using the profits they made on the phone service)

Lets check the question stem:

On the basis of the information provided in the passage above, which of the following questions can be answered?

In other words, we need to find something that can definitely be inferred from the passage.

Lets check the options:

(A) Are phone companies as efficient as cable companies in providing reliable and inexpensive service?
The passage makes no mention of reliability of service. Hence, this question cannot be answered.

(B) If phone companies were allowed to provide cable service, would they want to do so?
The passage makes no mention about whether phone companies are interested in getting into the cable TV space. Hence, this question cannot be answered.

(C) Do the cable companies believe that the local phone companies make a profit on phone service?
Definitely correct.
Cable companies believe that phone companies can subsidize their cable TV offering thanks to the profit they make on phone service => they believe that the phone companies make a profit on phone service.

(D) Are local phone companies forbidden to offer cable service?
The passage makes no mention about whether phone companies are allowed to enter the cable TV space, or forbidden. Hence, this question cannot be answered.

(E) Is it expected that phone companies will have a monopoly on cable service?
Completely out of scope, not discussed anywhere in the passage. All we know is that they have a monopoly in the telephone space - we have no idea if they will have a monopoly on Cable service. Hence, this question cannot be answered.
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(A) Are phone companies as efficient as cable companies in providing reliable and inexpensive service? - the passage does not contain any information regarding the efficiency of phone companies providing cable service.
(B) If phone companies were allowed to provide cable service, would they want to do so? - the passage does not contain any information regarding the preference of the phone company in setting up a cable service.
(C) Do the cable companies believe that the local phone companies make a profit on phone service? - yes. The cables companies do believe that local phone companies earn a profit from the existing phone services. This school of thought is perfectly reflected in the statement of the passage that reads "...., these telephone companies would have an unfair advantage, because their cable transmissions could be subsidized by the profits of their monopolies on phone service." Hence, (C) is the right answer choice.
(D) Are local phone companies forbidden to offer cable service? - the passage does not contain any information that could answer this question.
(E) Is it expected that phone companies will have a monopoly on cable service? - what's mentioned in the passage is that phone companies have a monopoly over the phone services they provide. We do not have any information regarding whether these phone companies would wield monopolistic power over the cable industry as well.