Industry analysts feel that Bluecorp paid far too much to acquire riva

A, C, D are irrelevant and obviously wrong.

Let's focus on B & E, which I was super confused between.

The argument & conclusion:
- Analysts feel Bluecorp paid too much for an acquisition.
- While limited competition will allow Bluecorp to raise prices, will also encourage new competitors to enter.
- Therefore, raising prices isn't sustainable, and so the acquisition was an expensive mistake.

Key assumption here: Acquisition price is based on maintaining high selling prices.

(B) The combination of Bluecorp and Strickland creates an entity whose size allows it to produce items at a far lower cost than could any smaller enterprise.
- INCORRECT - Doesn't directly counter the argument. Even if costs go down, and it sells at a lower price than competitors can, it would still not reach the profit levels expected to justify the transaction price.

(E) When two large companies in the same field combine, entrepreneurs tend to shy away from the field due to the single entity's perceived dominance.
- CORRECT - This suggests that new competitors will be wary to challenge Bluecorp and it can successfully raise the price and maintain high profit levels.


Great question. Not 100% sure, but IMO answer E.

Industry analysts feel that Bluecorp paid far too much to acquire rival firm Strickland. While doing so limited competition they face in the marketplace, this approach cannot be profitable in the long run. Once two rival firms merge in order to increase profits, the higher prices would only provide other competitors an opportunity to enter the field at a lower price, cutting into Bluecorp's profits and making the acquisition of Strickland an expensive mistake.

Which of the following, if true, most seriously weakens the argument?


(A) In some countries it is legal for two companies to merge even if the resulting entity would nearly monopolize the market. Irrelevant

(B) The combination of Bluecorp and Strickland creates an entity whose size allows it to produce items at a far lower cost than could any smaller enterprise. Correct

so, if it sell its products at same prices of smaller companies, its profits will be higher than smaller companies

(C) In addition to eliminating competition, Bluecorp's acquisition gives it a much more substantial presence in urban areas. Incorrect

ir partially weakens argument but it is not related with higher prices

(D) As a result of the acquisition, the new corporate entity will create two smaller entities to operate as independent suppliers to Bluecorp. Irrelevant

new info

(E) When two large companies in the same field combine, entrepreneurs tend to shy away from the field due to the single entity's perceived dominance. Incorrect

support argument