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# Profits pay for a company's research and development, which is the

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Manager
Joined: 20 Feb 2017
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Profits pay for a company's research and development, which is the  [#permalink]

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16 Aug 2018, 09:51
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Difficulty:

85% (hard)

Question Stats:

49% (02:02) correct 51% (02:20) wrong based on 313 sessions

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Profits pay for a company's research and development, which is the company's primary source of innovation that helps the company maintain its position in the market. During the recession when the profits decline, companies are unable to generate enough profits to sustain prior levels of research and development. However, even during the recession, the competitive pressure to innovate don't decline.

The information given most strongly supports which of the following general claims?

A. A company that does not cut back on research and development expenses during the recession most likely funds the same by other means such as cutting expenses or dipping into cash reserves.

B. A company that lost its market share during the recession can earn the same back by increasing spending on research and development once the recession is over

C. Companies that lose their market position do not maintain a steady research and development budget.

D. A company can cuts its research and development budget and still maintain its market position provided its research and development budget is higher than its competition, to begin with.

E. Companies that significantly cut their research and development budget during the recession generally lose a large proportion of their scientist.

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Manager
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Re: Profits pay for a company's research and development, which is the  [#permalink]

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16 Aug 2018, 10:39
Only A stands.
Alterative source of funding for R&D wings.
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18 Aug 2018, 09:53
since the competitive pressure to innovate doesn't decline-- there must be something that is supporting the Research and Development in the absence of funding from profits. Hence, A.
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Re: Profits pay for a company's research and development, which is the  [#permalink]

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18 Aug 2018, 10:23
I do not feel that this is a good question! A is a clear winner & the question stem formation is also very unusual. Can you please specify the source?
Manager
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Profits pay for a company's research and development, which is the  [#permalink]

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23 Aug 2018, 04:13
Hi,

Is this a good quality question because it makes us assume that companies yield to the "competitive pressure" and increase spending on R&D. Also, nowhere it is mentioned that companies are obligated to keep up their market position.

Thanks,
-NonPlus
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Re: Profits pay for a company's research and development, which is the  [#permalink]

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24 Aug 2018, 20:31
mgcon wrote:
I do not feel that this is a good question! A is a clear winner & the question stem formation is also very unusual. Can you please specify the source?

Friend, there is a possibility that you are very good in critical reasoning. The Source is EGMAT and i am told it is a reliable source for verbal. But certainly nothing can come close to official questions .
Regards
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Re: Profits pay for a company's research and development, which is the  [#permalink]

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13 Oct 2018, 04:13
1
The key point is - " profits are the PRIMARY ( not ONLY) source for R and D"

When recession- profits decline- therefore primary source no longer there.

Still competition exits

If competition still exits then R and D are still getting funded ,but the funding is not from PRIMARY SOURCE .
Inference- other sources are LIKELY providing funding
A fits well

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Intern
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Re: Profits pay for a company's research and development, which is the  [#permalink]

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12 Nov 2018, 12:56
Raksat wrote:
Profits pay for a company's research and development, which is the company's primary source of innovation that helps the company maintain its position in the market. During the recession when the profits decline, companies are unable to generate enough profits to sustain prior levels of research and development. However, even during the recession, the competitive pressure to innovate don't decline.

The information given most strongly supports which of the following general claims?

A. A company that does not cut back on research and development expenses during the recession most likely funds the same by other means such as cutting expenses or dipping into cash reserves.

B. A company that lost its market share during the recession can earn the same back by increasing spending on research and development once the recession is over

C. Companies that lose their market position do not maintain a steady research and development budget.

D. A company can cuts its research and development budget and still maintain its market position provided its research and development budget is higher than its competition, to begin with.

E. Companies that significantly cut their research and development budget during the recession generally lose a large proportion of their scientist.

GMATNinja can you please help me? Although I eliminated others based on logic, still feel that choice A doesn't necessarily need to be true. I have highlighted the text that seems to bother me. for all i know, there could be hundred things (how about debt?) a company can do to maintain R&D expenses . As far as i understand, for an inference choice to be true, every aspect of the answer choice needs to be true. Am i missing something here? ''fun times''
Intern
Joined: 18 Mar 2018
Posts: 20
Re: Profits pay for a company's research and development, which is the  [#permalink]

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29 Dec 2018, 08:20
The OA to this question requires us to assume that companies do want to maintain a market share and that they will take some measures to do so. Does this not go outside of the requirement of a GMAT question? It will be very helpful to get an answer to this as I have been struggling to understand the basis of this question's reasoning.
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Posts: 1479
Re: Profits pay for a company's research and development, which is the  [#permalink]

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29 Dec 2018, 13:47
1
Although this question does have its problems (the English is rather poor), the objections people are making to A do not stand. It's important to notice that A does NOT say that companies will continue to spend on R&D during the recession. It simply says that if companies DO maintain their previous R&D spending, they must be finding some other source of funding. Since the stimulus tells us that profits alone aren't enough during the recession, it has to be true that any company that maintains its funding levels is relying on some additional means.
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Re: Profits pay for a company's research and development, which is the  [#permalink]

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15 Jun 2019, 04:19
Can any expert please tell me what is wrong with option C?
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Re: Profits pay for a company's research and development, which is the  [#permalink]

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17 Jun 2019, 02:32
@e-gmat

why is option D wrong ?
The company can still maintain its competitive level of innovation by cutting the excess cost it gives to R&D than other competitive firm.
Re: Profits pay for a company's research and development, which is the   [#permalink] 17 Jun 2019, 02:32
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