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# Tony: A new kind of videocassette has just been developed

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Tony: A new kind of videocassette has just been developed [#permalink]

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06 Jul 2013, 00:00
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Tony: A new kind of videocassette has just been developed. It lasts for only half as many viewings as the old kind does but costs a third as much. Therefore, video rental stores would find it significantly more economical to purchase and stock movies recorded on the new kind of videocassette than on the old kind.
Anna: But the videocassette itself only accounts for 5 percent of the price a video rental store pays to buy a copy of a movie on video; most of the price consists of royalties the store pays to the studio that produced the movie. So the price that video rental stores pay per copy would decrease by considerably less than 5 percent, and royalties would have to be paid on additional copies.

Which one of the following, if true, would contribute most to a defense of Tony’s position against Anna’s reply?
(A) The price that video rental stores pay for movies recorded on videocassettes is considerably less than the retail price of those movies.
(B) A significant proportion of the movies on videocassette purchased by video rental stores are bought as replacements for worn-out copies of movies the stores already have in stock.
(C) The royalty fee included in the price that video rental stores pay for movies on the new kind of videocassette will be half that included in the price of movies on the old kind.
(D) Given a choice, customers are more likely to buy a movie on videocassette than to rent it if the rental fee is more than half of the purchase price.
(E) Many of the movies rented from video rental stores, particularly children’s movies, average several viewings per rental fee.
[Reveal] Spoiler: OA

Last edited by pqhai on 08 Jul 2013, 14:23, edited 1 time in total.
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Re: Tony: A new kind of videocassette has just been developed [#permalink]

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06 Jul 2013, 02:22
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this one i will say ...little odd.
both C and D Somehow helps...
IMO C..too
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Last edited by blueseas on 08 Jul 2013, 10:12, edited 1 time in total.
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Re: Tony: A new kind of videocassette has just been developed [#permalink]

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06 Jul 2013, 08:07
@shaileshmishra - I think you are subtracting old from new for Option D and new from Old for option C in explanation ??Could you please explain that ! Thanks !
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Re: Tony: A new kind of videocassette has just been developed [#permalink]

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08 Jul 2013, 06:51
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cumulonimbus wrote:
Tony: A new kind of videocassette has just been developed. It lasts for only half as many viewings as the old kind does but costs a third as much. Therefore, video rental stores would find it significantly more economical to purchase and stock movies recorded on the new kind of videocassette than on the old kind.
Anna: But the videocassette itself only accounts for 5 percent of the price a video rental store pays to buy a copy of a movie on video; most of the price consists of royalties the store pays to the studio that produced the movie. So the price that video rental stores pay per copy would decrease by considerably less than 5 percent, and royalties would have to be paid on additional copies.

The gist of Tony's argument is : A movie recorded on a new tape ,for half the no of views as compared to the old one, costs just a third as much.
Thus, if a person (from video rental stores) was buying a movie recorded on an old tape , say capable of 20 views at 30$, for the same movie on the new tape with only 10 views, he would end up saving even if he buys 2 of them. The gist of Anna's argument is :She counters the above notion by asserting that cost of tapes is only a very small component of the net price being paid per copy,and that even though the new tapes would decrease some costs,they would not be able to contribute much to the overall savings,as because of the additional royalty being paid,on each extra copy. The question stem wants us to strengthen Tony's argument $$\to$$ it would be more economical for video rental stores to stock movies on the new tape than on the old one.. (A) The price that video rental stores pay for movies recorded on videocassettes is considerably less than the retail price of those movies. Doesn't address the concerned conclusion.If anything, it might in a way show that people would prefer renting out movies than buying it. (B) A significant proportion of the movies on videocassette purchased by video rental stores are bought as replacements for worn-out copies of movies the stores already have in stock. It doesn't address the concerned conclusion.If someone buys movies as replacements, how does that affect the feasibility of using old tapes? (C) The royalty fee included in the price that video rental stores pay for movies on the new kind of videocassette will be half that included in the price of movies on the old kind. This directly affects the conclusion of Anna and also provides an economic advantage: Say the no of views on an old tape = 20, cost of only the tape = 30$ and royalty = 100 $$$\to$$ 30$+100$= 130$

With the new tape, views on the new tape = 10, cost of only the tape = 10 $and royalty = 50$. Thus for the same views, he would buy 2 such copies$$\to$$ 20$+100$ = 120$(D) Given a choice, customers are more likely to buy a movie on videocassette than to rent it if the rental fee is more than half of the purchase price. This option doesn't address the conclusion in a desirable way.The relations between the purchase price and the rental fee is open.Also, the option suggests that irrespective of the tape being used, they would prefer buying tapes only if the rental fees is more than half of the purchase price.Just shows a consumer behavior. (E) Many of the movies rented from video rental stores, particularly children’s movies, average several viewings per rental fee. Irrelevant. IMO the answer is C. Can you please share the source? _________________ Manager Status: Got Bling! Joined Phd Finance at IIML Affiliations: IIMB, advantages.us, IIML Joined: 03 Jul 2013 Posts: 96 Location: India Concentration: Finance, Economics Schools: iim-bangalore - Class of 1994 GMAT 1: 750 Q59 V43 GPA: 3.12 WE: Research (Investment Banking) Followers: 1 Kudos [?]: 19 [0], given: 39 Re: Tony: A new kind of videocassette has just been developed [#permalink] ### Show Tags 08 Jul 2013, 10:09 cumulonimbus wrote: Tony: A new kind of videocassette has just been developed. It lasts for only half as many viewings as the old kind does but costs a third as much. Therefore, video rental stores would find it significantly more economical to purchase and stock movies recorded on the new kind of videocassette than on the old kind. Anna: But the videocassette itself only accounts for 5 percent of the price a video rental store pays to buy a copy of a movie on video; most of the price consists of royalties the store pays to the studio that produced the movie. So the price that video rental stores pay per copy would decrease by considerably less than 5 percent, and royalties would have to be paid on additional copies. Which one of the following, if true, would contribute most to a defense of Tony’s position against Anna’s reply? (A) The price that video rental stores pay for movies recorded on videocassettes is considerably less than the retail price of those movies. (B) A significant proportion of the movies on videocassette purchased by video rental stores are bought as replacements for worn-out copies of movies the stores already have in stock. (C) The royalty fee included in the price that video rental stores pay for movies on the new kind of videocassette will be half that included in the price of movies on the old kind. (D) Given a choice, customers are more likely to buy a movie on videocassette than to rent it if the rental fee is more than half of the purchase price. (E) Many of the movies rented from video rental stores, particularly children’s movies, average several viewings per rental fee. How would I use D in the Question to allow d to me as correct Answer...C at least solves my problem!! Should be C. Thiskind of boo boo costs points!!! Verbal Forum Moderator Joined: 16 Jun 2012 Posts: 1132 Location: United States Followers: 279 Kudos [?]: 3116 [0], given: 123 Re: Tony: A new kind of videocassette has just been developed [#permalink] ### Show Tags 08 Jul 2013, 14:24 This question comes from Kaplan LSAT test prep. OA is C. _________________ Please +1 KUDO if my post helps. Thank you. "Designing cars consumes you; it has a hold on your spirit which is incredibly powerful. It's not something you can do part time, you have do it with all your heart and soul or you're going to get it wrong." Chris Bangle - Former BMW Chief of Design. Verbal Forum Moderator Joined: 16 Jun 2012 Posts: 1132 Location: United States Followers: 279 Kudos [?]: 3116 [1] , given: 123 Re: Tony: A new kind of videocassette has just been developed [#permalink] ### Show Tags 08 Jul 2013, 14:54 1 This post received KUDOS cumulonimbus wrote: Tony: A new kind of videocassette has just been developed. It lasts for only half as many viewings as the old kind does but costs a third as much. Therefore, video rental stores would find it significantly more economical to purchase and stock movies recorded on the new kind of videocassette than on the old kind. Anna: But the videocassette itself only accounts for 5 percent of the price a video rental store pays to buy a copy of a movie on video; most of the price consists of royalties the store pays to the studio that produced the movie. So the price that video rental stores pay per copy would decrease by considerably less than 5 percent, and royalties would have to be paid on additional copies. Which one of the following, if true, would contribute most to a defense of Tony’s position against Anna’s reply? (A) The price that video rental stores pay for movies recorded on videocassettes is considerably less than the retail price of those movies. (B) A significant proportion of the movies on videocassette purchased by video rental stores are bought as replacements for worn-out copies of movies the stores already have in stock. (C) The royalty fee included in the price that video rental stores pay for movies on the new kind of videocassette will be half that included in the price of movies on the old kind. (D) Given a choice, customers are more likely to buy a movie on videocassette than to rent it if the rental fee is more than half of the purchase price. (E) Many of the movies rented from video rental stores, particularly children’s movies, average several viewings per rental fee. ANALYZE THE STIMULUS: Tony: A new videocassette lasts for only 1/2 as many viewings as the old kind does but costs 1/3 as much. Video rental stores would find it significantly more economical. Anna: the videocassette itself only accounts for 5 percent of the price, most of the price consists of royalties the store pays to the studio. Thus, the price that video rental stores pay per copy would decrease by considerably less than 5 percent, and royalties would have to be paid on additional copies Pre-thinking: The royalties should be paid for each film, not for how many videocassette used to record a film. If the film is divided into 2 videocassettes, the corresponding royalties should be divided too. ANALYZE EACH ANSWER: (A) The price that video rental stores pay for movies recorded on videocassettes is considerably less than the retail price of those movies. Wrong. The fact that how much studios sell “those movies” is out of scope. The main point is “royalties” - the rental fee - the store pays to the studio that produced the movie. (B) A significant proportion of the movies on videocassette purchased by video rental stores are bought as replacements for worn-out copies of movies the stores already have in stock. Wrong. If the royalties does not correspond to the divided length of new videocassette ==> More videocassettes, more royalties ==> Clearly, B does not help Toni. (C) The royalty fee included in the price that video rental stores pay for movies on the new kind of videocassette will be half that included in the price of movies on the old kind. Correct. C clearly states that the royalties should be paid for each film. It doesn’t matter how many videocassette used to record a film, e.g., if the film is divided into 2 videocassettes, the corresponding royalties should be divided too. Therefore, if a video rental store can save videocassette costs, that would be definitely economical. (D) Given a choice, customers are more likely to buy a movie on videocassette than to rent it if the rental fee is more than half of the purchase price. Wrong. The fact that “customers are more likely to buy a moive” is totally out of scope. (E) Many of the movies rented from video rental stores, particularly children’s movies, average several viewings per rental fee. Wrong. Nothing about specific categories such as children’s movies. Thus, E is wrong. Hope it helps. _________________ Please +1 KUDO if my post helps. Thank you. "Designing cars consumes you; it has a hold on your spirit which is incredibly powerful. It's not something you can do part time, you have do it with all your heart and soul or you're going to get it wrong." Chris Bangle - Former BMW Chief of Design. Manager Joined: 14 Nov 2011 Posts: 150 Location: United States Concentration: General Management, Entrepreneurship GPA: 3.61 WE: Consulting (Manufacturing) Followers: 0 Kudos [?]: 18 [0], given: 103 Re: Tony: A new kind of videocassette has just been developed [#permalink] ### Show Tags 08 Jul 2013, 23:46 mau5 wrote: cumulonimbus wrote: Tony: A new kind of videocassette has just been developed. It lasts for only half as many viewings as the old kind does but costs a third as much. Therefore, video rental stores would find it significantly more economical to purchase and stock movies recorded on the new kind of videocassette than on the old kind. Anna: But the videocassette itself only accounts for 5 percent of the price a video rental store pays to buy a copy of a movie on video; most of the price consists of royalties the store pays to the studio that produced the movie. So the price that video rental stores pay per copy would decrease by considerably less than 5 percent, and royalties would have to be paid on additional copies. The gist of Tony's argument is : A movie recorded on a new tape ,for half the no of views as compared to the old one, costs just a third as much. Thus, if a person (from video rental stores) was buying a movie recorded on an old tape , say capable of 20 views at 30$, for the same movie on the new tape with only 10 views, he would end up saving even if he buys 2 of them.

The gist of Anna's argument is :She counters the above notion by asserting that cost of tapes is only a very small component of the net price being paid per copy,and that even though the new tapes would decrease some costs,they would not be able to contribute much to the overall savings,as because of the additional royalty being paid,on each extra copy.

The question stem wants us to strengthen Tony's argument $$\to$$ it would be more economical for video rental stores to stock movies on the new tape than on the old one..

(A) The price that video rental stores pay for movies recorded on videocassettes is considerably less than the retail price of those movies.
Doesn't address the concerned conclusion.If anything, it might in a way show that people would prefer renting out movies than buying it.

(B) A significant proportion of the movies on videocassette purchased by video rental stores are bought as replacements for worn-out copies of movies the stores already have in stock.
It doesn't address the concerned conclusion.If someone buys movies as replacements, how does that affect the feasibility of using old tapes?

(C) The royalty fee included in the price that video rental stores pay for movies on the new kind of videocassette will be half that included in the price of movies on the old kind.

This directly affects the conclusion of Anna and also provides an economic advantage:

Say the no of views on an old tape = 20, cost of only the tape = 30$and royalty = 100$ $$\to$$ 30$+100$ = 130$With the new tape, views on the new tape = 10, cost of only the tape = 10$ and royalty = 50$. Thus for the same views, he would buy 2 such copies$$\to$$ 20$+100$= 120$

(D) Given a choice, customers are more likely to buy a movie on videocassette than to rent it if the rental fee is more than half of the purchase price.
This option doesn't address the conclusion in a desirable way.The relations between the purchase price and the rental fee is open.Also, the option suggests that irrespective of the tape being used, they would prefer buying tapes only if the rental fees is more than half of the purchase price.Just shows a consumer behavior.

(E) Many of the movies rented from video rental stores, particularly children’s movies, average several viewings per rental fee.
Irrelevant.

Hi Guys,
OA has been corrected.
Their were two sets of questions from the same passage and I marked the wrong one here.
It is an LSAT question not from Kaplan.

Mau - can you explain option D through a bit of quant.
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Re: Tony: A new kind of videocassette has just been developed [#permalink]

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09 Jul 2013, 00:10
cumulonimbus wrote:
Mau - can you explain option D through a bit of quant.

Sure,

Taking the same example:
Scenario I:
Say the no of views on an old tape = 20, cost of only the tape = 30$and royalty = 100$ $$\to$$ 30$+100$ = 130$Rent price : for breaking even, I would assume that the rent is at-least 6.5$.
Purchase price: Assume it to be 12 $. Thus, according to the given statement, a consumer is likely to buy this tape then to rent it. To make them rent it, he will have to reduce the rent price to say 5$. Thus, he would incur a loss of 30 $. He can also reduce the rent price to say 6$(and in this case, he is taking his chances against the behavioral pattern of the consumer) and reduce the net loss to 10 $. Scenario II: With the new tape, views on the new tape = 10, cost of only the tape = 10$ and royalty = 50$. Thus for the same views, he would buy 2 such copies$$\to$$ 20$+100$= 120$
Rent price : for breaking even, I would assume that the rent is now at-least 6$. Purchase price : 12$, Thus, A consumer might/might not rent this tape.Now,the only thing in the hand of the store owner is the rent price : He can not change the purchase price. Thus, by decreasing the rent price to such a level that all the consumers rent the tape, instead of buying it, he might have to reduce the rent price to say 5$. Now, he would again incur a loss of 20$. Comparing this to the above scenario,this loss is definitely less than the loss of 30$, but more than loss of 10$. The takeaway is that this behavior of consumers can affect both the scenarios equally, and there is no reason to believe that it will affect movies on new tape less severely.Also, the dynamics hugely depend on the purchase price,which is, in this problem, akin to an outcome on a Russian roulette,i.e. not in our hands.

I hope this was clear.
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Re: Tony: A new kind of videocassette has just been developed [#permalink]

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29 Jun 2015, 14:22
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Re: Tony: A new kind of videocassette has just been developed [#permalink]

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12 Sep 2016, 08:17
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: Tony: A new kind of videocassette has just been developed   [#permalink] 12 Sep 2016, 08:17
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