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# Utility companies in the United States are generally private

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Manager
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Utility companies in the United States are generally private [#permalink]

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04 Jul 2013, 03:18
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Question Stats:

83% (02:02) correct 17% (00:38) wrong based on 119 sessions

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Utility companies in the United States are generally privately-owned, for-profit business ventures. One notable exception is the Tennessee Valley Authority, which was formed under the New Deal in the 1930s and continues, under federal control, to provide electricity to parts of the Southeast. Given the current pro-business climate in the region, however, it is safe to say that TVA is long overdue to be privatized.

The argument that the ownership of the Tennessee Valley Authority should be privatized rests on which of the following assumptions?

A) A pro-business climate demands the private ownership of utilities.
B) New Deal programs are outdated and should be discontinued.
C) Electricity in the Southeast will be more efficiently distributed if utilities are privately owned.
D) The price of electricity is currently higher than it would be if TVA were privatized.
E) Most residents of the Southeast prefer that TVA enter private ownership

OA after some discussion
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Re: Utility companies in the United States are generally private [#permalink]

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05 Jul 2013, 02:42
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I picked A and here is my 2 cents.

The form of this question is like:
X is not Y
Because of A, X should be Y

The assumption is: A requires X to be Y.

For example:
In the past, almost CEOs in company X did not hold an MBA
Because of the new hiring rules, all CEOs in company X should hold an MBA.
==> Assumption: new hiring rules require all CEOs applicants to hold an MBA.
If we negate this assumption: new hiring rules require all CEOs applicants NOT to hold an MBA ==> Conclusion “all CEOs should hold MBA” fails.

Back to this question.

ANALYZE THE STIMULUS:

TVA is not privately-owned, for profit business company
Because of current pro-business climate in the region, TVA should be privatized.
Assumption should be: the current pro-business climate requires TVA to be privately-owned, for profit business company

A) A pro-business climate demands the private ownership of utilities.
Correct. As stated above.

B) New Deal programs are outdated and should be discontinued.
Wrong. Even the New deal programs would be discontinued, TVA is still under Federal control.

C) Electricity in the Southeast will be more efficiently distributed if utilities are privately owned.
Wrong. TEMPTING, but wrong. Please note that the argument does not say TVA is distributing electricity NOT efficiently.

D) The price of electricity is currently higher than it would be if TVA were privatized.
Wrong. D actually assumes electricity prices would be lower if TVA were privatized. However its logic is wrong because:
(1) TVA is the government-owned company now, so Government should back up its financial problems, TVA does not have to raise prices to get more profit. However, if it were privatized and would be for-profit company, why TVA lower prices? It does not make sense (at least in practice). In addition, if prices would be lower, assume you were an investor, your motivation is profit, should you buy TVA?
==> Therefore, D is not "Must Be True" assumption.
(2) Assumption is the foundation of the conclusion, do not assume too far. The answer “could be true” is always correct. Please make sure the assumption is MUST be true. No Assumption ==> No conclusion.

E) Most residents of the Southeast prefer that TVA enter private ownership
Wrong. The fact “residents prefer….” is not relevant and does not help maintain the conclusion.

Waiting for OA.
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Re: Utility companies in the United States are generally private [#permalink]

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04 Jul 2013, 04:47
Utility companies in the United States are generally privately-owned, for-profit business ventures. One notable exception is the Tennessee Valley Authority, which was formed under the New Deal in the 1930s and continues, under federal control, to provide electricity to parts of the Southeast. Given the current pro-business climate in the region, however, it is safe to say that TVA is long overdue to be privatized.

The argument that the ownership of the Tennessee Valley Authority should be privatized rests on which of the following assumptions?
A) A pro-business climate demands the private ownership of utilities. - Classical Shell game option. Pro-business climate DEMANDS privatization but not MANDATES it. Incorrect
B) New Deal programs are outdated and should be discontinued. - Ok, outdated programs should be discontinued, so we should close the "Tennessee Valley Authority" rather than privatize. Incorrect
C) Electricity in the Southeast will be more efficiently distributed if utilities are privately owned. - In order to increase Efficiency, we should privatize TAV, but before that check option C. Very close option but incorrect.
D) The price of electricity is currently higher than it would be if TVA were privatized.
-Lets say the current electricity price is 2$/unit electricity price after privatization is 1$/unit

Before privatization TAV (NOT for-profit business venture) is charging higher price. WHY?
Not because TAV wants to make huge money as it's a NOT for-profit business venture but because of certain inefficiencies that we don't know.

WHY & HOW costs will be lower after privatization?
May be coz of Competition, Efficiency & many other factors etc

If privatization can reduce costs & improve efficiency , we should make TAV private
- Correct

E) Most residents of the Southeast prefer that TVA enter private ownership - Author is not concerned about the preferences of residents. Incorrect

SO OA should be D
Very good question after a long time. I would definitely place it in 700+ level.
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Re: Utility companies in the United States are generally private [#permalink]

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04 Jul 2013, 11:30
+ 1 for D ,A is authoritative.

A) A pro-business climate demands the private ownership of utilities.
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Re: Utility companies in the United States are generally private [#permalink]

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04 Jul 2013, 21:05
BukrsGmat wrote:
Utility companies in the United States are generally privately-owned, for-profit business ventures. One notable exception is the Tennessee Valley Authority, which was formed under the New Deal in the 1930s and continues, under federal control, to provide electricity to parts of the Southeast. Given the current pro-business climate in the region, however, it is safe to say that TVA is long overdue to be privatized.

The argument that the ownership of the Tennessee Valley Authority should be privatized rests on which of the following assumptions?

A) A pro-business climate demands the private ownership of utilities.
B) New Deal programs are outdated and should be discontinued.
C) Electricity in the Southeast will be more efficiently distributed if utilities are privately owned.
D) The price of electricity is currently higher than it would be if TVA were privatized.
E) Most residents of the Southeast prefer that TVA enter private ownership

OA after some discussion

Need more explanations for this.
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Re: Utility companies in the United States are generally private [#permalink]

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09 Jul 2014, 00:52
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: Utility companies in the United States are generally private [#permalink]

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10 Jul 2014, 10:47
+ 1 for A.
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Utility companies in the United States are generally private [#permalink]

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13 Jul 2014, 02:59
BukrsGmat wrote:
Utility companies in the United States are generally privately-owned, for-profit business ventures. One notable exception is the Tennessee Valley Authority, which was formed under the New Deal in the 1930s and continues, under federal control, to provide electricity to parts of the Southeast. Given the current pro-business climate in the region, however, it is safe to say that TVA is long overdue to be privatized.

The argument that the ownership of the Tennessee Valley Authority should be privatized rests on which of the following assumptions?

A) A pro-business climate demands the private ownership of utilities.
B) New Deal programs are outdated and should be discontinued.
C) Electricity in the Southeast will be more efficiently distributed if utilities are privately owned.
D) The price of electricity is currently higher than it would be if TVA were privatized.
E) Most residents of the Southeast prefer that TVA enter private ownership

OA after some discussion

Argument structure is:

Because current pro-business climate ------------> It is late company to be currently privatized

Pro-business climate wants company to be privatized
. That is the assumption. Answer A fits best
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Re: Utility companies in the United States are generally private [#permalink]

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21 May 2017, 16:00
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.
Re: Utility companies in the United States are generally private   [#permalink] 21 May 2017, 16:00
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