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# Most cable television companies currently require customers to subscri

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Most cable television companies currently require customers to subscri  [#permalink]

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25 Feb 2015, 20:26
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Difficulty:

65% (hard)

Question Stats:

62% (02:04) correct 38% (02:28) wrong based on 744 sessions

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Most cable television companies currently require customers to subscribe to packages of channels, but consumer groups have recently proposed legislation that would force the companies to offer a la carte pricing. Subscribers would pay less, argue the consumer groups, because they could purchase only the desired channels. However, the cable industry argues that under the current package pricing, popular channels subsidize less-popular ones, providing more options for viewers. For this reason, the industry claims that it is always cheaper for the consumer to purchase many bundled channels than to buy them individually.

Which of the following would be most important for the government to determine before deciding whether to require cable television companies to offer a la carte pricing in order to reduce consumer costs?

A. Whether the total number of channels offered to consumers would decrease, along with programming diversity, as a result of the a la carte pricing structure

B. Whether advertising revenue for the cable television companies would decrease as a result of the a la carte pricing structure

C. Whether the vast majority of consumers would greatly reduce the number of channels purchased if given the option of purchasing them individually

D. Whether cable and satellite companies currently have the ability to buy channels individually from programmers and content providers

E. Whether a la carte subscribers would be required to have new television set-top boxes

This question is part of the GMAT Club Critical Reasoning : Evaluate Revision Project.

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Re: Most cable television companies currently require customers to subscri  [#permalink]

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01 Mar 2015, 08:06
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souvik101990 wrote:
This question is part of the GMAT Club Critical Reasoning : Evaluate Revision Project.

Most cable television companies currently require customers to subscribe to packages of channels, but consumer groups have recently proposed legislation that would force the companies to offer a la carte pricing. Subscribers would pay less, argue the consumer groups, because they could purchase only the desired channels. However, the cable industry argues that under the current package pricing, popular channels subsidize less-popular ones, providing more options for viewers. For this reason, the industry claims that it is always cheaper for the consumer to purchase many bundled channels than to buy them individually. Which of the following would be most important for the government to determine before deciding whether to require cable television companies to offer a la carte pricing in order to reduce consumer costs?

A. Whether the total number of channels offered to consumers would decrease, along with programming diversity, as a result of the a la carte pricing structure

B. Whether advertising revenue for the cable television companies would decrease as a result of the a la carte pricing structure

C. Whether the vast majority of consumers would greatly reduce the number of channels purchased if given the option of purchasing them individually

D. Whether cable and satellite companies currently have the ability to buy channels individually from programmers and content providers

E. Whether a la carte subscribers would be required to have new television set-top boxes

Between choice A and C , choice C looks correct.

This is an evaluate question.- Whether the la carte menu will reduce costs?

The correct choice should pass the variance analysis test.

Analysis of option A-
Extreme 1 -the total number of channels offered to consumers would decrease, along with programming diversity, as a result of the a la carte pricing structure-

But will the costs come down? cannot say....may be the channels offered are expensive or cheaper...

Extreme 2- the total number of channels offered to consumers would NOT decrease, along with programming diversity, as a result of the a la carte pricing structure

Again the cost may come down because we do not know what channels will the subscribers choose-whether they will choose the expensive ones or the cheap ones...

So A is not the answer.

Analysis of option C-

Extreme 1-the vast majority of consumers would greatly reduce the number of channels purchased if given the option of purchasing them individually

So the consumers may choose channels to reduce the costs.- - Cost may come down.

Extreme 2-the vast majority of consumers would NOT greatly reduce the number of channels purchased if given the option of purchasing them individually

So the costs may go up because they may have to pay more because under current package popular channels subsidize less-popular ones.- Cost may go up

Hence , C should be the correct answer.
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Re: Most cable television companies currently require customers to subscri  [#permalink]

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13 Dec 2016, 02:47
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Most cable television companies currently require customers to subscribe to packages of channels, but consumer groups have recently proposed legislation that would force the companies to offer a la carte pricing. Subscribers would pay less, argue the consumer groups, because they could purchase only the desired channels. However, the cable industry argues that under the current package pricing, popular channels subsidize less-popular ones, providing more options for viewers. For this reason, the industry claims that it is always cheaper for the consumer to purchase many bundled channels than to buy them individually.

Which of the following would be most important for the government to determine before deciding whether to require cable television companies to offer a la carte pricing in order to reduce consumer costs?

Government has to decide whether to require cable television companies to offer a la carte pricing in order to reduce consumer costs <- The Move

Fact presented: under the current package pricing, popular channels subsidize less-popular ones, providing more options for viewers.

Therefore, if the customers subscribe to more channels than the number of channels they are presently subscribed to, then The Move will only hurt the customers because
they will have to pay more as the channels will be offered in unbundled fashion, nullifying the subsidy.

A. Whether the total number of channels offered to consumers would decrease, along with programming diversity, as a result of the a la carte pricing structure
Yes: Not a strong evaluation point. Also, programming diversity looks like OFS. Therefore, won't look at the other extreme - No
B. Whether advertising revenue for the cable television companies would decrease as a result of the a la carte pricing structure
Yes: Even if the revenue of the cable television companies increases, it won't matter as this point doesn't address the behavior of the cost to the consumer.
No: Even if the revenue of the cable television companies doesn't increase, it won't matter as this point doesn't address the behavior of the cost to the consumer.
C. Whether the vast majority of consumers would greatly reduce the number of channels purchased if given the option of purchasing them individually
Yes: If the consumers reduce the number of channels purchased, then it makes sense to unbundle the channels.
No: Then it will only hurt the customers as they now have to pay more in the absence of the subsidy. Gov has to consider this.
D. Whether cable and satellite companies currently have the ability to buy channels individually from programmers and content providers
Yes: Doesn't address the behavior of the cost to the consumer
No: Doesn't address the behavior of the cost to the consumer
E. Whether a la carte subscribers would be required to have new television set-top boxes
Yes: In case they have to, no information is provided how much the set-top box would cost. Maybe the amount saved from purchasing only the channels the consumers watch will cover the cost of the set-top box. Also, the set-top box is a one-time installation. So not a very strong evaluation point. Since this extreme is not strong enough, we won't go to the second extreme.
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Re: Most cable television companies currently require customers to subscri  [#permalink]

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10 Feb 2018, 08:18
1
Most cable television companies currently require customers to subscribe to packages of channels, but consumer groups have recently proposed legislation that would force the companies to offer a la carte pricing. Subscribers would pay less, argue the consumer groups, because they could purchase only the desired channels. However, the cable industry argues that under the current package pricing, popular channels subsidize less-popular ones, providing more options for viewers. For this reason, the industry claims that it is always cheaper for the consumer to purchase many bundled channels than to buy them individually.

Which of the following would be most important for the government to determine before deciding whether to require cable television companies to offer a la carte pricing in order to reduce consumer costs?

(A) Whether the total number of channels offered to consumers would decrease, along with programming diversity, as a result of the a la carte pricing structure
The argument doesn't talk about the reduction in the number of channels. Besides, channels won't shut down if a la carte pricing comes into picture.

(B) Whether advertising revenue for the cable television companies would decrease as a result of the a la carte pricing structure
Advertising revenue is out of scope

(C) Whether the vast majority of consumers would greatly reduce the number of channels purchased if given the option of purchasing them individually
Correct. If the consumers do purchase fewer channels then the plan will be a hit else it will be a miss.

(D) Whether cable and satellite companies currently have the ability to buy channels individually from programmers and content providers
Ability of cable and satellite companies is out of scope.

(E) Whether a la carte subscribers would be required to have new television set-top boxes
It is one time of cost that people shouldn't mind. Besides, it is out of scope
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Re: Most cable television companies currently require customers to subscri  [#permalink]

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07 Sep 2018, 23:00
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Re: Most cable television companies currently require customers to subscri   [#permalink] 07 Sep 2018, 23:00
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