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# QOTD: A product that represents a clear technological advance

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MBA Section Director
Joined: 19 Mar 2012
Posts: 5180
Location: India
GMAT 1: 760 Q50 V42
GPA: 3.8
WE: Marketing (Non-Profit and Government)

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13 Mar 2018, 04:29
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Difficulty:

95% (hard)

Question Stats:

51% (04:52) correct 49% (01:43) wrong based on 356 sessions

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Verbal Question of The Day: Day 241: Critical Reasoning

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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.

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

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13 Mar 2018, 04:30
4
1
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:

Quote:
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.
• 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.

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

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).

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

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).

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

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.

Quote:
(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.

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).

Quote:
(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 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).

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13 Mar 2018, 05:16
1
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.
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15 Mar 2018, 06:35
souvik101990 wrote:

Verbal Question of The Day: Day 241: Critical Reasoning

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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.

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

Every question of the day will be followed by an expert reply by GMATNinja in 12-15 hours. Stay tuned! Post your answers and explanations to earn kudos.

What can we say about the two pieces of bold text.
1. The second one is an implication of the first one ------------> A is out.

2. The argument does not reccomend "the second bold piece". It suggests "the strategy to maximize overall profit from a new product is to charge less than the greatest possible price" ----------------> B is out.

These two are eliminated easily. After that C was the clear choice for me. But D and E made me think a little more.

3. But the first part is not an assumption, it is a known fact, ok, it some sort of consideration at least. And the argument does not argue with it, it argues with the second part --------> D is out.

4. The 1st part of E sounds good, but careful. The 2nd part of E says that the second vold part presents an outcome, but it is not true. Outcome is an ammout of money earned, but in our case the second bold part is a strategy - to charge the greatest possible price (we do not know the income of this strategy).

So C.
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31 May 2018, 04:31
souvik101990 wrote:

Verbal Question of The Day: Day 241: Critical Reasoning

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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.

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

Every question of the day will be followed by an expert reply by GMATNinja in 12-15 hours. Stay tuned! Post your answers and explanations to earn kudos.

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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