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# Some airlines allegedly reduce fares on certain routes

Author Message
Intern
Joined: 02 Oct 2012
Posts: 15

Kudos [?]: 22 [0], given: 9

Location: India
Concentration: Operations, General Management
GMAT 1: 700 Q51 V32
GPA: 3.6
WE: Operations (Energy and Utilities)
Some airlines allegedly reduce fares on certain routes [#permalink]

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06 Oct 2013, 07:30
2
This post was
BOOKMARKED
00:00

Difficulty:

65% (hard)

Question Stats:

54% (01:18) correct 46% (01:24) wrong based on 313 sessions

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1.Some airlines allegedly reduce fares on certain routes to a level at which they lose money, in order to drive
competitors off those routes. However, this method of eliminating competition cannot be profitable in the long
run. Once an airline successfully implements this method, any attempt to recoup the earlier losses by charging
high fares on that route for an extended period would only provide competitors with a better opportunity to
undercut the airline's fares. Which of the following, if true, most seriously weakens the argument?

A. In some countries it is not illegal for a company to drive away competitors by selling a product below cost.
B. Airline executives generally believe that a company that once underpriced its fares to drive away competitors is
very likely to do so again if new competitors emerge.
C. As part of promotions designed to attract new customers, airlines sometimes reduce their ticket prices to below
an economically sustainable level.
D. On deciding to stop serving particular routes, most airlines shift resources to other routes rather than reduce
the size of their operations.
E. When airlines dramatically reduce their fares on a particular route, the total number of air passengers on that
route increases greatly.
-------------------------------------------------------------------------------------------------------------------------------------------------

2.>At present the Hollywood Restaurant has only standard-height tables. However, many customers come to
watch the celebrities who frequent the Hollywood, and they would prefer tall tables with stools because such
seating would afford a better view of the celebrities. Moreover, diners seated on stools typically do not stay as
long as diners seated at standard-height tables. Therefore, if the Hollywood replaced some of its seating with
high tables and stools, its profits would increase. The argument is vulnerable to criticism on the grounds
that it gives reason to believe that it is likely that

A. some celebrities come to the Hollywood to be seen, and so might choose to sit at the tall tables if they were
available
B. the price of meals ordered by celebrities dining at the Hollywood compensates for the longer time, if any, they
spend lingering over their meals
C. a customer of the Hollywood who would choose to sit at a tall table would be an exception to the generalization
D. a restaurant's customers who spend less time at their meals typically order less expensive meals than those
who remain at their meals longer
E. with enough tall tables to accommodate all the Hollywood's customers interested in such seating, there would
be no view except of other tall tables
-------------------------------------------------------------------------------------------------------------------------------------------------
[Reveal] Spoiler: OA

Kudos [?]: 22 [0], given: 9

Manager
Status: Persevering
Joined: 15 May 2013
Posts: 218

Kudos [?]: 99 [1], given: 34

Location: India
GMAT Date: 08-02-2013
GPA: 3.7
WE: Consulting (Consulting)
Re: Some airlines allegedly reduce fares on certain routes [#permalink]

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06 Oct 2013, 11:31
1
KUDOS
2
This post was
BOOKMARKED
1)E

Some airlines allegedly reduce fares on certain routes to a level at which they lose money, in order to drive
competitors off those routes. However, this method of eliminating competition cannot be profitable in the long
run. Once an airline successfully implements this method, any attempt to recoup the earlier losses by charging
high fares on that route for an extended period would only provide competitors with a better opportunity to
undercut the airline's fares
. Which of the following, if true, most seriously weakens the argument?

A. In some countries it is not illegal for a company to drive away competitors by selling a product below cost. So what some countries really doesn't cut it.
B. Airline executives generally believe that a company that once underpriced its fares to drive away competitors is
very likely to do so again if new competitors emerge. Correct as it explains that in the event that fares are raised by the airlines and it faces competition from new competitors who were driven away. It can lower its air fare to drive them away again.
C. As part of promotions designed to attract new customers, airlines sometimes reduce their ticket prices to below
an economically sustainable level. How does this weaken the argument ?
D. On deciding to stop serving particular routes, most airlines shift resources to other routes rather than reduce
the size of their operations. Kind of strengthens the argument and does the opposite of what is being asked
E. When airlines dramatically reduce their fares on a particular route, the total number of air passengers on that
route increases greatly. The argument is talking about higher fares (see the bold portion), so this kind of irrelevant.

2)C

We are concerned with criticizing the argument, so should stick to the information present in it.

2.>At present the Hollywood Restaurant has only standard-height tables. However, many customers come to
watch the celebrities who frequent the Hollywood, and they would prefer tall tables with stools because such
seating would afford a better view of the celebrities. Moreover, diners seated on stools typically do not stay as
long as diners seated at standard-height tables. Therefore, if the Hollywood replaced some of its seating with
high tables and stools, its profits would increase. The argument is vulnerable to criticism on the grounds
that it gives reason to believe that it is likely that

A. some celebrities come to the Hollywood to be seen, and so might choose to sit at the tall tables if they were
available irrelevant
B. the price of meals ordered by celebrities dining at the Hollywood compensates for the longer time, if any, they
spend lingering over their meals irrelevant and extraneous information
C. a customer of the Hollywood who would choose to sit at a tall table would be an exception to the generalization
about lingering. Correct Shows that people,in general, do not prefer to sit at a tall table. So the plan will fail and attacks the premise that many people prefer tall tables.
D. a restaurant's customers who spend less time at their meals typically order less expensive meals than those
who remain at their meals longer . Careful with this one, There is no apparent relationship b/w profit and expensive nature of meal.
E. with enough tall tables to accommodate all the Hollywood's customers interested in such seating, there would
be no view except of other tall tables. So how does this affect the profitability
_________________

--It's one thing to get defeated, but another to accept it.

Kudos [?]: 99 [1], given: 34

Intern
Joined: 02 Oct 2012
Posts: 15

Kudos [?]: 22 [0], given: 9

Location: India
Concentration: Operations, General Management
GMAT 1: 700 Q51 V32
GPA: 3.6
WE: Operations (Energy and Utilities)
Re: Some airlines allegedly reduce fares on certain routes [#permalink]

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08 Oct 2013, 07:23
Thanks for the explanation... Now it is clear to me.

Kudos [?]: 22 [0], given: 9

Intern
Joined: 02 Oct 2012
Posts: 15

Kudos [?]: 22 [0], given: 9

Location: India
Concentration: Operations, General Management
GMAT 1: 700 Q51 V32
GPA: 3.6
WE: Operations (Energy and Utilities)
Re: Some airlines allegedly reduce fares on certain routes [#permalink]

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08 Oct 2013, 07:27
Researchers have found that when very overweight people, who tend to have relatively low metabolic rates,
lose weight primarily through dieting, their metabolisms generally remain unchanged. They will thus burn
significantly fewer calories at the new weight than do people whose weight is normally at that level. Such
newly thin persons will, therefore, ultimately regain weight until their body size again matches their metabolic
rate. The conclusion of the argument above depends on which of the following assumptions?
A. Relatively few very overweight people who have dieted down to a new weight tend to continue to consume
substantially fewer calories than do people whose normal weight is at that level.
B. The metabolisms of people who are usually not overweight are much more able to vary than the metabolisms
of people who have been very overweight.
C. The amount of calories that a person usually burns in a day is determined more by the amount that is
consumed that day than by the current weight of the individual.
D. Researchers have not yet determined whether the metabolic rates of formerly very overweight individuals can
be accelerated by means of chemical agents.
E. Because of the constancy of their metabolic rates, people who are at their usual weight normally have as much
difficulty gaining weight as they do losing it.

Kudos [?]: 22 [0], given: 9

GMAT Club Legend
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Posts: 10130

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Re: Some airlines allegedly reduce fares on certain routes [#permalink]

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30 Oct 2014, 08:54
Hello from the GMAT Club VerbalBot!

Thanks to another GMAT Club member, I have just discovered this valuable topic, yet it had no discussion for over a year. I am now bumping it up - doing my job. I think you may find it valuable (esp those replies with Kudos).

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Re: Some airlines allegedly reduce fares on certain routes [#permalink]

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10 Nov 2016, 12:00
Hello from the GMAT Club VerbalBot!

Thanks to another GMAT Club member, I have just discovered this valuable topic, yet it had no discussion for over a year. I am now bumping it up - doing my job. I think you may find it valuable (esp those replies with Kudos).

Want to see all other topics I dig out? Follow me (click follow button on profile). You will receive a summary of all topics I bump in your profile area as well as via email.

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Senior Manager
Status: DONE!
Joined: 05 Sep 2016
Posts: 408

Kudos [?]: 23 [0], given: 283

Re: Some airlines allegedly reduce fares on certain routes [#permalink]

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13 Nov 2016, 16:32
First prompt:

A. In some countries it is not illegal for a company to drive away competitors by selling a product below cost. --> eliminate; irrelevant
B. Airline executives generally believe that a company that once underpriced its fares to drive away competitors is
very likely to do so again if new competitors emerge. --> stronger than E. This choice eliminates the possibility for competitors to come back into the market in the future when the company decides to push prices back up again. If the competitor knows the company isn't afraid to bounce prices back down, they have no incentive to return to the market in the long run. Thus, correct!
C. As part of promotions designed to attract new customers, airlines sometimes reduce their ticket prices to below
an economically sustainable level. --> restating the argument - doesn't provide us with anything new - thus eliminate
D. On deciding to stop serving particular routes, most airlines shift resources to other routes rather than reduce
the size of their operations. --> irrelevant
E. When airlines dramatically reduce their fares on a particular route, the total number of air passengers on that
route increases greatly. --> weaker than B. Company would still face the possibility of competitors coming into the market later on. Eliminate.

Kudos [?]: 23 [0], given: 283

Verbal Expert
Joined: 14 Dec 2013
Posts: 3148

Kudos [?]: 3279 [0], given: 22

Location: Germany
Schools: HHL Leipzig
GMAT 1: 780 Q50 V47
WE: Corporate Finance (Pharmaceuticals and Biotech)
Re: Some airlines allegedly reduce fares on certain routes [#permalink]

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24 Nov 2016, 04:12
The OA is correct and the explanation given above appears sufficient. If there are any specific questions, please post them here and then click again on the "Request Expert Reply" button.

Kudos [?]: 3279 [0], given: 22

Re: Some airlines allegedly reduce fares on certain routes   [#permalink] 24 Nov 2016, 04:12
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