A product that represents a clear technological advance over competing

The question tempts us to jump straight into the answer choices without first understanding the argument. But let’s focus first on the argument’s conclusion: “The strategy to maximize overall profit from a new product is to charge less than the greatest possible price.”

Now let’s break down the argument -- and this one is pretty long and complicated. Ignore the boldface for now, because if we don’t understand how the argument works, we’ll have a hard time explaining the role of each portion:

• A new product with advanced technology can generally be sold for a high price.
• Many companies will charge the highest possible price, because (a) advanced tech tends to be surpassed quickly and (b) companies want to make large profits while they still can.
  
  • Knowing that whatever technological advantage you have will soon be surpassed, you charge the highest possible price to maximize your immediate profits.
• When competitors see a company making large profits on a new product, they’ll want to quickly match that product’s tech.
  
  • By maximizing your own profits, you are giving competing companies an incentive to quickly "catch up" and make a product with similar capabilities.
  • If, instead, you DON'T charge the highest possible price and DON’T maximize your immediate profits, competitors will be less quick to match the product.
  • Without a glaringly high price tag, the technologically advanced product has more time to earn profits for your company.
• Therefore, according to the author, if a company wants to maximize overall profit from a new product, it should charge less than the highest possible price.

In this argument, the author lays out the reasoning for two strategies: charge the max price or charge less than the max price. According to the author, companies can maximize overall profit by charging LESS than the max price. Now let’s focus on the two statements in bold:

• “Many companies charge the maximum possible price for such a product.” - Many companies pursue the strategy of charging the max price. This is NOT the strategy recommended by the author.
• “technological advances tend to be quickly surpassed” - This is one of the two reasons why companies like to pursue the max-price strategy. The second reason is that “companies want to make large profits while they still can.”

Now that we have a very concrete breakdown of the passage, we can analyze the abstract-sounding answer choices without our eyeballs dissolving. Note that the choices are each broken into two halves, so if we reject either half, then we can reject the entire choice.


We know that statement 1 explains why companies like to charge the max. However, choice (A) claims that statement 1 explains why charging the max is counterproductive. That’s not what the “many companies” in this sentence believe, so let’s eliminate choice (A).


Choice (B) claims that statement 1 is supporting the author’s preferred strategy (don’t charge the max). But statement 1 actually explains why many companies do the opposite (charge the max).

Also, statement 2 presents the strategy employed by many companies, not the strategy that the author recommends. Eliminate choice (B).


Choice (C) matches our analysis precisely. Statement 2 lays out the strategy pursued by many companies (charging the max). Statement 1 states one of the two reasons why many companies decide to charge the max. Let’s keep this wonderfully straightforward answer choice and see if we can eliminate the rest.


We know that the author rejects the “charge-the-max” strategy followed by many companies. But does the author reject the fact that technological advances are quickly surpassed? No. The author believes this fact and recommends an alternate strategy with that knowledge. Eliminate choice (D).


The first half of choice (E) is fair enough. Considering that tech advantages don’t last long and that companies like profits, we can understand why many companies charge the max. However, does statement 2 (“many companies charge the maximum possible price for such a product”) present an intended outcome? No. The outcome of earning large profits is implied, but statement 2 simply states the strategy itself, not the intended outcome. Thus, the second half is definitely inaccurate, and we can eliminate choice (E).

The correct answer is (C).
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Hi Pavan.

The signal word "because", so the first bold part is the REASON to support the second bold part - a strategy (the maximum possible price).

You understand option A like: The first is a reason used to support that a certain strategy. <== It's correct. But It is NOT what option A says:

Option A says: The first is a reason used to show that a certain strategy is counterproductive. ==> It means "the first used to weaken the second part". But the first part does not oppose the second bold part. In fact, the first supports the second. Hence, A is wrong.

Hope it helps.

Hi Pavan,

pqhai has very aptly responded to your question. I just want to add one thing.

To do any question wrong on GMAT, you must commit two errors:
1. Accept an incorrect choice for wrong reason - the way you did in option A.
2. Reject a correct choice for wrong reasons - the way you did in option C.

Now, my question to you is that have you learnt from both the errors in this question? Besides learning why you chose incorrect option A, have you also learnt why you incorrectly rejected option C? If the answer is yes, then good job. Otherwise, think why did you reject option C and how would you ensure that you don't do similar errors in future questions.

Thanks,
Chiranjeev
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A product that represents a clear technological advance over competing products can generally command a high price. Because technological advances tend to be quickly surpassed and companies want to make large profits while they still can, many companies charge the maximum possible price for such a product. But large profits on the new product will give competitors a strong incentive to quickly match the new product's capabilities. Consequently, the strategy to maximize overall profit from a new product is to charge less than the greatest possible price.

To simplify the question:

In this question, the strategy is to charge the maximum price possible. Why should they charge the maximum price? Because technological advances tend to be quickly surpassed. However, what does this strategy do? It causes the competitors to jump in as fast as possible. So, the author's opinion is: the strategy should be to charge less than the greatest possible price.

Now, with this understanding:

(A) The first is a consideration raised to argue that a certain strategy is counterproductive; the second presents that strategy. - The 1st part is incorrect as the 1st part gives are reason for the strategy and does not state that it is counterproductive; 2nd part is correct
(8) The first is a consideration raised to support the strategy that the argument recommends; the second presents that strategy. - Again, the 1st part is incorrect as the 1st statement supports the strategy and not what the argument recommends. The argument recommends a different strategy
(C) The first is a consideration raised to help explain the popularity of a certain strategy; the second presents that strategy. - This is correct since the 1st part gives a reason for the strategy being used (popularity)
(D) The first is an assumption, rejected by the argument, that has been used to justify a course of action; the second presents that course of action. - The word 'assumption' is incorrect. This is not an assumption. It is clearly stated.
(E) The first is a consideration that has been used to justify adopting a certain strategy; the second presents the intended outcome of that strategy. - The part is incorrect since the 2nd statement is not the outcome but the strategy itself.

Hope this helps

I'm happy to respond.

Here is the second boldface statement:
many companies charge the maximum possible price for such a product
This is clearly a popular strategy, because many companies do it. Notice, though, it is NOT the strategy endorsed by the argument. If we take the argument as a whole, the conclusion of the entire argument is:
Consequently, the strategy to maximize overall profit from a new product is to charge less than the greatest possible price
Notice this is the opposite of the popular strategy in the second BF statement!

It's true that the first BF supports the second BF, but the second BF is not a strategy that the argument recommends. In fact, the second BF is the polar opposite of the argument that the strategy recommends! This is precisely the problem with (B)! Yes, the first BF supports the second BF, but the second BF is diametrically opposed to the argument's conclusion. It cannot conceivable be described as "the strategy that the argument recommends."

By contrast, (C) is much better. It refers to the "popularity" of the second BF, which is perfectly fair, because many companies pursue that line of action. The first BF helps to explain the second BF, so everything is fine with option (C).

When the question talks about "the argument," you have to consider the argument as a whole, not just the second highlighted in bold.

Does all this make sense?
Mike
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Can someone please explain why (C) is the correct answer?

I don't understand where "popularity" is explained in the argument.

Hi! There,

Lemme try explaining you with my though process. Let's understand the argument while we are reading it.

A product that represents a clear technological advance over competing products can generally command a high price (Looks like a general principle that is present in the market). Because technological advances tend to be quickly surpassed (It is commenting on the general principle. We can think that there is always a competition among many players for producing high-tech products) and companies want to make large profits (As mentioned in the first sentence. Advanced technology= Higher price command) while they still can, many companies charge the maximum possible price for such a product (Companies charge maximum money in the initial phases when none of the player has introduced advanced product) (Basically, it is company's strategy to charge more till the time no new competitor comes into the market) . But large profits on the new product will give competitors a strong incentive to quickly match the new product's capabilities (It says that high profits drive more companies to manufacture more high-tech product. Obviously, what is hot in the market raises competition). Consequently, the strategy to maximize overall profit from a new product is to charge less than the greatest possible price (This is the suggested strategy by the author that if a company has same thing to offer on less price than what others are offering, consumers will buy that more, increasing the profits).

Notice that the strategy suggested by the author is different from the strategy currently practiced.

In the argument above, the two portions in boldface play which of the following roles?

(A) The first is a consideration raised to argue that a certain strategy is counterproductive (Nowhere in the argument it is mentioned that any strategy is counterproductive. Only alternate strategy is introduced by the author); the second presents that strategy.
(8) The first is a consideration raised to support the strategy that the argument recommends ; the second presents that strategy ('that' here refers to the recommended strategy, and 2nd BF is certainly not the recommended strategy by the author).
(C) The first is a consideration raised to help explain the popularity of a certain strategy ('Popularity' here refers to 'Reason'. The reason that companies charge more in the initial phase is that they probably have small window to do so, until other competitors come in the picture); the second presents that strategy (Yes, second is that strategy- charge high).
(D) The first is an assumption (Not an assumption. It is 'Actual practice'), rejected by the argument, that has been used to justify a course of action; the second presents that course of action.
(E) The first is a consideration that has been used to justify adopting a certain strategy; the second presents the intended outcome (It is not intended outcome. It is the actual outcome) of that strategy.


Hope it is helpful.

Kudos won't hurt for this explanation

can someone explain what is the conclusion here?

Here goes the conclusion:

Consequently, the strategy to maximize overall profit from a new product is to charge less than the greatest possible price.

Adding my thought process as well.

The author here is of the view that the strategy to maximize the overall profit from a new product is to charge less than the greatest possible price, i.e. the author doesn't agree with the strategy applied by companies which produce technologically advanced products.
Lets go through the answer choices:

(A) The first is a consideration raised to argue that a certain strategy is counterproductive; the second presents that strategy.
The second boldface is indeed a strategy that the author considers is counterproductive, but the first boldface is not a consideration raised to support that the idea conveyed by the second boldface is counterproductive. The following sentence is the consideration that suggests that the idea conveyed by the second boldface is counterproductive
But large profits on the new product will give competitors a strong incentive to quickly match the new product's capabilities

(B) The first is a consideration raised to support the strategy that the argument recommends; the second presents that strategy.

The argument does not recommend the idea in the second boldface, in fact the argument says that the profits can be maximized from new products by charging less than the greatest possible price. The first boldface on the other hand is indeed a consideration raised to support the idea conveyed in the second boldface.
Many companies charge maximum possible price for a product for 2 reasons which are : technological advances tend to be quickly surpassed and companies want to make large profits while they still can.
Thus the first boldface does indeed support the idea conveyed in the second boldface
(C) The first is a consideration raised to help explain the popularity of a certain strategy; the second presents that strategy.
The second boldface is indeed a popular strategy employed by companies (which produce technologically advanced products). The first boldface is indeed a consideration raised to help explain the idea conveyed by the second boldface. The first boldface gives a reason as to why many companies charge the maximum possible price for a technologically advanced product. This is the CORRECT answer

(D) The first is an assumption, rejected by the argument, that has been used to justify a course of action; the second presents that course of action.

The first boldface is not rejected by the argument, it is in fact used to support the second boldface which on the other hand is something the author does not agree to.
(E) The first is a consideration that has been used to justify adopting a certain strategy; the second presents the intended outcome of that strategy.

The first boldface is indeed a consideration used to justify a certain strategy, and what is that strategy ? That strategy is the idea conveyed by the second boldface. So the second boldface is not the intended outcome of the strategy but it is in fact that strategy itself.

Phew !!! That took some time, and I would love kudos if that helped.

A product that represents a clear technological advance over competing products can generally command a high price. Because technological advances tend to be quickly surpassed and companies want to make large profits while they still can, many companies charge the maximum possible price for such a product. But large profits on the new product will give competitors a strong incentive to quickly match the new product's capabilities. Consequently, the strategy to maximize overall profit from a new product is to charge less than the greatest possible price.

In the argument above, the two portions in boldface play which of the following roles?

(A) The first is a consideration raised to argue that a certain strategy is counterproductive; the second presents that strategy.
First doesn't argue against second bold face.

(B) The first is a consideration raised to support the strategy that the argument recommends; the second presents that strategy.
The argument doesn't recommend the strategy supported by first bold face

(C) The first is a consideration raised to help explain the popularity of a certain strategy; the second presents that strategy.
Correct.

(D) The first is an assumption, rejected by the argument, that has been used to justify a course of action; the second presents that course of action.
First bold face is not an assumption. Additionally, second bold face is rejected by the argument -- not the first.

(E) The first is a consideration that has been used to justify adopting a certain strategy; the second presents the intended outcome of that strategy.
Second is not the outcome; it is the strategy.

Argument

A strategy followed by many companies: charge the maximum possible price for such a product
Supporting stmnts: technological advances tend to be quickly surpassed and companies want to make large profits while they still can

The strategy recommended by the argument: charge less than the greatest possible price.
Supporting stmnts: but large profits on the new product will give competitors a strong incentive to quickly match the new product's capabilities.


(A) The first is a consideration raised to argue that a certain strategy is counterproductive; the second presents that strategy.
The first bold statement is the supporting statement to the strategy given in the second bold statement. It does not show that the strategy is counterproductive.

(B) The first is a consideration raised to support the strategy that the argument recommends; the second presents that strategy.
The argument does not recommend the strategy is bold. It recommends the other strategy.

(C) The first is a consideration raised to help explain the popularity of a certain strategy; the second presents that strategy.
Perfect.

(D) The first is an assumption, rejected by the argument, that has been used to justify a course of action; the second presents that course of action.
The argument does not reject the the first bold statement.

(E) The first is a consideration that has been used to justify adopting a certain strategy; the second presents the intended outcome of that strategy.
The second presents the strategy, not the intended outcome of the strategy.
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In the argument above, the two portions in [b]boldface play which of the following roles?[/b]

Main point (The final conclusion that author believes): Consequently, the strategy to maximize overall profit from a new product is to charge less than the greatest possible price.

(A) The first is a consideration raised to argue that a certain strategy is counterproductive; the second presents that strategy.

BF 1 is a consideration raised to support a certain strategy given in BF 2. Opposite answer. Eliminate

(B) The first is a consideration raised to support the strategy that the argument recommends; the second presents that strategy.

Though BF 1 supports the strategy but not the one argument recommends. Argument's recommendation is author's final conclusion. Eliminate

(C) The first is a consideration raised to help explain the popularity of a certain strategy; the second presents that strategy.

Popular view is given in first line of the passage and BF 1 is there to explain that view. BF 2 is that strategy. CORRECT

(D) The first is an assumption, rejected by the argument, that has been used to justify a course of action; the second presents that course of action.

Totally wrong

(E) The first is a consideration that has been used to justify adopting a certain strategy; the second presents the intended outcome of that strategy.

BF 2 itself is a strategy and not the outcome of that strategy. Eliminate
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The right answer is C. Since this is a bold-faced question, only the premises and conclusions matter. A bold-faced statement can only be a premise or conclusion, and the premises either support or go against an argument.
The overall conclusion of this argument is that companies should charge less than the max possible price. In general, it makes our task easier to identify what the statements do in relationship to a fixed point, i.e. the overall conclusion.

1: A premise, which doesn't really support the overall conclusion, but supports another line of action
2. A way of doing things, a strategy that is against the strategy of the main conclusion

A - The first consideration doesn't really argue any strategy is counter-productive. OUT

B - The first premise doesn't support the overall recommended strategy. OUT

C - It does explain the popularity of a strategy (without endorsing or going against it), and the second statement is in fact, the strategy explained in the first. CORRECT

D - A statement cannot be an assumption because assumptions are by definition unstated. OUT

E - Statement 1 is fine, its a premise, and its used to adopt a strategy. Statement two however is the strategy itself, not any outcome of it. Hence, E is also OUT

Remember that with bold-faced questions, the trick is to break down the complex phrasing of the answer options by categorising them into premises or conclusions that support or go against an argument.

- Matoo
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Fact ... Premise ("Because tech... still can") ... SubConclusion ("many ... product")
CounterPremise ("But large ... capabilities") ... Main Conclusion ("Consequently, the ... price")

(A) The first is a consideration raised to argue that a certain strategy is counterproductive; the second presents that strategy.
First is not arguing against the strategy, it just tells us a premise from the stated fact

(B) The first is a consideration raised to support the strategy that the argument recommends; the second presents that strategy.
It is not supporting the main conclusion, but rather the subconclusion

(C) The first is a consideration raised to help explain the popularity of a certain strategy; the second presents that strategy.

(D) The first is an assumption, rejected by the argument, that has been used to justify a course of action; the second presents that course of action.
The argument doesn't reject it. It rejects the subconclusion

(E) The first is a consideration that has been used to justify adopting a certain strategy; the second presents the intended outcome of that strategy.
Mix up... the first part is right but the second is not the outcome, rather it is the action they take (the outcome is max profits, the strategy is charging the max amount)

Hello to all...
AaronPond, MartyTargetTestPrep, jennpt, AjiteshArun, ccooley, DmitryFarber, GMATNinja, VeritasKarishma
Mr. mikemcgarry is not available in the club for long time. So, could you explain a bit what did Mr Mike want to mean by the highlighted part?
Thanks__
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KarishmaB ExpertsGlobal5 - Meaning of consideration is the act of thinking about something carefully. But can you pls explain the the context in which consideration is used in options of this CR question. Also, if you can share the context in which consideration is used on GMAT RC and CR it will be really helpful for me to decipher the meaning while attempting any GMAT questions.

Thanks,
Anshul

A consideration is something taken into account before arriving at a conclusion. It can support or oppose a point of view. So a consideration is a fact/premise, something to consider before concluding.
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dear experts GMATNinjaTwo, VeritasKarishma, MartyTargetTestPrep, AndrewN,VeritasPrepBrian,GMATRockstar
KarishmaB

avigutman, AndrewN,MartyTargetTestPrep , RonTargetTestPrep

I am struggling with choice A.


from the argument: a certain is used by many companies. but in author's view the certain will lead to a side effect, which will shorten the period many companies can make large profits.??? does it mean the strategy is counterproductive?
that's why I pickup A.

genuinely need your help.

have a nice day.

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