Tony: A new kind of videocassette has just been developed. It lasts

Question

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.

mau5 · Accepted Answer

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  	o   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 $  	o  30$+100$ = 130$

With the new tape, views on the new tape = 10, cost of only the tape = 10 $ and royalty = 50$. Thus for the same views, he would buy 2 such copies 	o  20$+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?

pqhai · Answer

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.

cumulonimbus · Answer

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.

mau5 · Answer

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 $  	o  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$. Thus for the same views, he would buy 2 such copies 	o  20$+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.

chesstitans · Answer

the type of this question is special-mix question. It is a mix of strengthen and logic-responding (only respond to one premise)

this question is long and too complex. Nevertheless, fortunately, if each option is read carefully, only C has in-scope meaning.

C does make the most sense; put it in another way, C strengthens argument of the first person by responding to the last premise (or reason) of the second person.

anud33p · Answer

For a given number of viewings:
Original Cost =  
New Cost =   * 2 = 0.66 DVD + 2*Royalty (Because to achieve the same number of viewings, we will now need twice the number of DVDs.)

Also, DVD = 0.05 * Royalty
So, Original Cost = 1.05 Royalty
New Cost = 0.033 Royalty + 2*Royalty = 2.033 Royalty

How can we bust open this argument? How could we reduce the new cost ? 
If new Royalty was half the previous, New Cost = 1.033 Royalty. So, we still manage to save.

Hence,  (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.

Bunuel · Answer

Similar question to practice: https://gmatclub.com/forum/tony-a-new-k ... 25403.html

VerbalBot · Answer

Automated notice from GMAT Club VerbalBot: 

A member just gave Kudos to this thread, showing it’s still useful. I’ve bumped it to the top so more people can benefit. Feel free to add your own questions or solutions.

 This post was generated automatically.

Tony: A new kind of videocassette has just been developed. It lasts

Prep Toolkit

Top 5 GMAT Debrief Videos

615 to 715 in 15 Days (Ria's Strategies)

More than Quant/Verbal Abilities: Speed vs. Accuracy

745 with Only Self-Prep and GMAT Club

From 555 to 765: 210-point Improvement

Perfect 805 Score Debrief by Julia

My Rewards

GMAT Critical Reasoning (CR) Questions

Tony: A new kind of videocassette has just been developed. It lasts

Prep Toolkit

615 to 715 in 15 Days (Ria's Strategies)

More than Quant/Verbal Abilities: Speed vs. Accuracy

745 with Only Self-Prep and GMAT Club

From 555 to 765: 210-point Improvement

Perfect 805 Score Debrief by Julia

My Rewards