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# Some airlines allegedly reduce fares on certain routes to a

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

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17 Jan 2012, 17:43
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.

The underlying assumption of the argument is that lowering ticket fares for a long time is not profitable

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.
This supports the argument
(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.
This weakens the argument and hence the correct answer. This is because original argument assumes that loss occurs if airlines continue with the reduced price. The fact that airlines are willing to lower price further if competition arises means that this method should be profitable in the long run thus weakening the argument.
(C) As part of promotions designed to attract new customers, airlines sometimes reduce their ticket prices to below an economically sustainable level.
This supports the argument and hence incorrect answer
(D) On deciding to stop serving particular routes, most airlines shift resources to other routes rather than reduce the size of their operations.
Stop serving particular routes is beyond the scope of argument
(E) When airlines dramatically reduce their fares on a particular route, the total number of air passengers on that route increases greatly.
This supports the argument and hence incorrect answer
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11 Jan 2014, 05:36
milo wrote:
IMO the answer should be B. The author says first competitors are driven off these routes, but they will come back once the airline x charges higher prices again (i.o. to become profitable). Answer B says "no, the competitors won't come back because once they start flying these routes again the airline x will lower prices again and nobody makes any profit".

On answer E: The increase in passenger numbers could lead to higher utilization of planes and this higher efficiency to profitability, but it could also lead to the following: if I sell flight tickets for 1 Dollar I will make 100 Dollar loss on every customer. If the total number of airline passengers increases greatly, I may lose even more money.

E) When airlines dramatically reduce their fares on a particular route, the total number of air passengers on that route increases greatly.
Here E is definitely incorrect and you explained it well.

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.
But, I think there is a problem with B. In my opinion, it actually strengthens the argument.
Firstly the airline company is offering tickets at a low price and going into some loss. Furthermore, B option says it is very likely to do so again if new competitors emerge. It means that it will again reduce the price of their tickets, further going into loss. So, it actually strengthens the argument that this method is not profitable.

By the way what is the source of this question?
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11 Jan 2014, 05:38
noboru wrote:
Lot of discussion going on here...

I understand why B is correct, but I dont get why E is not. Please clarify. Thanks.

Hi,

The increase in passenger numbers could lead to higher utilization of planes and this higher efficiency to profitability, but it could also lead to the following: if I sell flight tickets for 1 Dollar I will make 100 Dollar loss on every customer. If the total number of airline passengers increases greatly, I may lose even more money.
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Re: Some airlines allegedly reduce fares on certain routes to a [#permalink]

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11 Jan 2014, 06:36
To drive off competitors, airlines reduce fares (even lose money)
BUT, not profitable for long-term (CONCLUSION)
Attempt to earn back losses by raising fares > give chance to competitors

Option A > 'some countries' / irrelevant
Option B > Weakening (solving the problem raised in the argument)
Option D > no mention of fluctuating fares and competition
Option E > 'number of air passengers' / irrelevant

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

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11 Jan 2014, 18:48
PREMISE - Some airlines allegedly reduce fares on certain routes to a level at which they lose money, in order to drive competitors off those routes.
PREMISE - 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.
CONCLUSION - This method of eliminating competition cannot be profitable in the long run.

Which of the following, if true, most seriously weakens the argument? WE ARE LOOKING FOR A SOLUTION WHERE IN THIS METHOD IS PROFITABLE IN A LONG RUN...

(A) In some countries it is not illegal for a company to drive away competitors by selling a product below cost....SO WHAT
(B) Airline executives generally believe that a company that once under priced its fares to drive away competitors is very likely to do so again if new competitors emerge... SO NEW COMPETITORS can again be eliminated and profit resumed by fare hike
(C) As part of promotions designed to attract new customers, airlines sometimes reduce their ticket prices to below an economically sustainable level...... already known.........but if they go too low on prices ... it would rather be a strengthener...
(D) On deciding to stop serving particular routes, most airlines shift resources to other routes rather than reduce the size of their operations....routes don't matter....profit does.....
(E) When airlines dramatically reduce their fares on a particular route, the total number of air passengers on that route increases greatly...BUT WOULD STILL BE AT LOSSES AS PER THE OPENING STATEMENT...
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Re: Some airlines allegedly reduce fares on certain routes to a [#permalink]

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08 Sep 2014, 04:12
nitya34 wrote:
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.

Pls elaborate

I think "However, this method of eliminating competition cannot be profitable in the long run." is the main conclusion of the argument.

statement B says that "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."... if this is taken to be true and every now and then a new competitor appears in the market and the airline drops the price to eliminate the new competitors, then in the long run the cycle continues... price drop -->eliminate competitor--> coming of new competitor --> again price drop.

on the other hand answer choice E seems to be the better choice between B and E.
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Re: Some airlines allegedly reduce fares on certain routes to a [#permalink]

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16 May 2015, 03:05
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.

In short, the airlines can drive off the competitors and the loss they make, the airlines cannot recoup that losses by charging high fares for an extended period (Conclusion of the argument) and the competitors can easily come back by under cutting the prices.

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.
Not worried about the legality of the process -> OFS

(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.
This weakens the conclusion as when the competitors come back and try to under cut the prices, the airlines again do so to drive off the competitors -> Correct

(C) As part of promotions designed to attract new customers, airlines sometimes reduce their ticket prices to below an economically sustainable level.
That is given in the premise. It doesn't talk about weakening 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.
In fact this strengthens the argument

(E) When airlines dramatically reduce their fares on a particular route, the total number of air passengers on that route increases greatly.
Losses * (Number of passengers) = More losses
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Re: Some airlines allegedly reduce fares on certain routes to a [#permalink]

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17 May 2015, 19:20
B for me

This weakens the conclusion as when the competitors come back and try to under cut the prices, the airlines again do so to drive off the competitors
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Re: Some airlines allegedly reduce fares on certain routes to a [#permalink]

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28 Sep 2015, 13:19
For B - if they keep cutting prices, it's not profitable in the long run. This strengthens the argument right? How can this weaken?
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Re: Some airlines allegedly reduce fares on certain routes to a [#permalink]

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18 Jan 2016, 06:15
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I marked d because of the below reason and i am wrong ; clearly as the difficulty level increase the more broader u need to expand your thinking .

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. - clearly OOS

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. - didnt get it the first time i read this option and i crossed it off the list

C) As part of promotions designed to attract new customers, airlines sometimes reduce their ticket prices to below an economically sustainable level. - OOS

D) On deciding to stop serving particular routes, most airlines shift resources to other routes rather than reduce the size of their operations.
D - well if airlines stop serving other routes then there is no more competition left so its a win situation for the airline which drop the fares as once its increase the fare passengers may not have other options -.
E) When airlines dramatically reduce their fares on a particular route, the total number of air passengers on that route increases greatly.
Even if the passengers increases greatly this is not affecting the conclusion on how will plan fail when airlines increase the price later . Plus the post by MILO explains it further why E is wrong .

What i missed in D Is what is think " most "
and if u read B it does say if other airlines drop try to play smart our airlines will not be afraid to again pull the same thread on them . SO thats i can be wrong .
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Re: Some airlines allegedly reduce fares on certain routes to a [#permalink]

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17 Dec 2016, 18:01
B makes sense. I chose E as a result of forgetting it was a "weaken" question. Good thing it's only practice.
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Re: Some airlines allegedly reduce fares on certain routes to a [#permalink]

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10 May 2017, 06:40
Thanks milo for the explanation.

Now i am clear why the option is B and not E.
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Some airlines allegedly reduce fares on certain routes to a [#permalink]

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25 Jun 2017, 10:04
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Here is why E cannot be right.

From the argument:

Quote:
Some airlines allegedly reduce fares on certain routes to a level at which they lose money,

In other words, while holding fares at the level necessary for driving away competitors, the airline doing so loses money.

Here's what E says.

Quote:
E. When airlines dramatically reduce their fares on a particular route, the total number of air passengers on that route increases greatly.

Notice, what E say does not undermine the conclusion, because even with the increase in passengers mentioned in E, the airline offering the lower prices will continue to lose money. A money losing fare level is a money losing fare level regardless of how many passengers an airline has at that level. So, adding the information provided by E does not change the conclusion that the strategy is not profitable.
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Re: Some airlines allegedly reduce fares on certain routes to a [#permalink]

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17 Sep 2017, 09:13
Hoping that experts would help me out here with the reasoning - I was stuck between B and E and picked E.
How does B win over E?
(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. - This means that competition won't enter the market of that particular route; cause the initial company would reduce its prices again. A contender

(E) When airlines dramatically reduce their fares on a particular route, the total number of air passengers on that route increases greatly.This means that the particular airline would make profits, another contender

So one talks about profit (E) and one talks about competition (B); and both weaken - can anyone help me on this?
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Some airlines allegedly reduce fares on certain routes to a [#permalink]

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19 Sep 2017, 19:31
Hoping that experts would help me out here with the reasoning - I was stuck between B and E and picked E.
How does B win over E?
(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. - This means that competition won't enter the market of that particular route; cause the initial company would reduce its prices again. A contender

(E) When airlines dramatically reduce their fares on a particular route, the total number of air passengers on that route increases greatly.This means that the particular airline would make profits, another contender

So one talks about profit (E) and one talks about competition (B); and both weaken - can anyone help me on this?

One key to getting the correct answer to a CR question is being very clear regarding what conclusion you are seeking to weaken or strengthen.

Here is the conclusion to this argument in this question.

this method of eliminating competition cannot be profitable in the long run.

Notice, in order to be profitable, the airline has to increase fares.

E does not indicate that the airline will be profitable, as E says what will happen when the fares are STILL DRAMATICALLY REDUCED. As long as the fares are dramatically reduced, the route will not be profitable no matter how many passengers take that route.

B, by indicating that it is likely that other airlines will stay out of the market even if the airline controlling the route increases prices, shows a path to profitability for the airline that took control of the route by underpricing the competition.
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Re: Some airlines allegedly reduce fares on certain routes to a [#permalink]

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19 Sep 2017, 22:26
I would go with D. The argument is that the competitors will come back once the airline starts increasing the fares. The option D says that if an airline goes out of the particular route, it is not easy for it to come back. Hence the airlines that are thrown out of competition cannot easily come back.

Hence according to me, D is the best answer.

Please correct me if I'm wrong.
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Re: Some airlines allegedly reduce fares on certain routes to a [#permalink]

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20 Sep 2017, 01:12
I would go with D. The argument is that the competitors will come back once the airline starts increasing the fares. The option D says that if an airline goes out of the particular route, it is not easy for it to come back. Hence the airlines that are thrown out of competition cannot easily come back.

Hence according to me, D is the best answer.

Please correct me if I'm wrong.

One way to look at it is to identify the conclusion. The conclusion is "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". Remember, we want to weaken this conclusion.

Let's look at (D) On deciding to stop serving particular routes, most airlines shift resources to other routes rather than reduce the size of their operations.
This choice fails to weaken the conclusion. It does not state anything to how it could weaken that conclusion that we had above. Notice how it also changes the focus away from the conclusion.

However answer choice (B) does so. It states that "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." Thus, it says that even if new competitors emerge, it will implement its previous strategy of underpricing. This weakens the argument because in the argument it essentially said otherwise. The conclusion stated that new competitors would emerge and cut the airline's fare.
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Re: Some airlines allegedly reduce fares on certain routes to a [#permalink]

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25 Nov 2017, 17:49
Conclusion: this method of elimination cannot be profitable in the long run.

Choice B shows a situation where the airline will charge higher fares with no competition, leaving the money losing fares and thus making profit in the long run.

Choice E point is that revenues will increase even if fares are kept low, but we don't know whether that will be enough to cover the costs. This choice does not ensure profitability, so it does not weaken the conclusion.
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Re: Some airlines allegedly reduce fares on certain routes to a [#permalink]

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26 Nov 2017, 01:28
I want to understand why option E is incorrect. In the long term, profitability may be sustained because of more number of passengers that the airlines managed to attract.

Whereas in option B, the airlines will again decrease prices thereby affecting profitability further.

Need an expert's opinion on this question.
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Re: Some airlines allegedly reduce fares on certain routes to a [#permalink]

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28 Nov 2017, 21:53
Nikhil_as wrote:
I want to understand why option E is incorrect. In the long term, profitability may be sustained because of more number of passengers that the airlines managed to attract.

Whereas in option B, the airlines will again decrease prices thereby affecting profitability further.

Need an expert's opinion on this question.

Choice (E) only tells us that we will have more customers "when airlines dramatically reduce their fares on a particular route." But what will happen when the airline increases its fares? Will those customers stick around? If they do, will other airlines offer lowers prices to undercut the increased fares?

The author of the passage would argue that an increase in the popularity of the route wouldn't help of those customers just end up flying with competitors once we start charging higher fares to recoup our earlier losses. Thus, choice (E) doesn't impact the author's specific argument and should be eliminated.

Notice the words "for an extended period" in the passage. The author's concern is that if the airline charges higher fares for an EXTENDED period, then eventually rivals will undercut those prices. Choice (B) tells us that the airline can charge higher fares for a while and then, after an EXTENDED period, reduce the fares again if needed to drive away competitors. Even though the airline has to repeatedly lower its prices, with each cycle they'll enjoy an EXTENDED period of charging higher fares and recouping their losses.

I hope that helps!

In other words, the airline would take some losses and then gain them back by charging higher fares for a while. If competitors try to undercut the airline, they'll simply slash fares again for a while to drive out the competition and then repeat the cycle.
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Re: Some airlines allegedly reduce fares on certain routes to a   [#permalink] 28 Nov 2017, 21:53

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