Commentator: Certain simplistic economic models suggest

Question

Commentator: Certain simplistic economic models suggest that as more people compete for jobs in any field, wages will fall. But as more people become interested in watching a professional sport, the salaries of that sport's athletes tend to rise. So, professional athletes’ salaries do not fit these simplistic economic models.

Which of the following is an assumption on which the commentator's argument depends?

A. The simplistic economic models suggest that as revenues in an industry increase, salaries in that industry will rise. 
 B. Increases in numbers of people interested in watching a professional sport lead to increases in revenue for the organizations that mange and promote that sport. 
 C. Increases in numbers of people interested in watching a professional sport lead to increases in the number of athletes competing for employment in that sport. 
 D. The wages of nonathletes’ jobs in certain professional sports have fallen as more people have become interested in watching those sports. 
 E. Professional athletes' salaries will continue to rise as long as sources of revenue, such as television rights, for the organizations that manage and promote that sport continue to increase.

JJ.jj · Answer

Why is A incorrect? The answer is C.

ravi1522 · Answer

explanation for why C is correct answer?

HarshavardhanR · Answer

Hey  JJ.jj ,

Let me try to help.

Argument in a nutshell :

- Some simplistic models -> As more people compete for jobs, wages will fall.
-  BUT  -> in the case of sports, as more people become interested in watching a sport, the salaries of the sport's athletes tends to increase (rather than decrease).
- Commentator's conclusion ->  Thus , pro athletes' salaries (which rise despite more people watching the sport) does not fit in with the simplistic models.

We need to find an  assumption  here.

Let's analyze the logic of the argument :

There is a fundamental gap here. Observe that

- As per the models, as more people compete for jobs (this means  more supply of labour/people  to do the available jobs), wages will fall)
- More people becoming interested in watching a sport => an  increase in demand  for watching the sport. Does this automatically mean that there are more athletes trying to get employed in that sport? Not really. 
- Only if there is an actual increase in number of athletes trying to get employed in a sport (i.e.,  more supply of labour/people ) will the simplistic models even be relevant. Only then can the commentator claim that ->

"given that the salaries increased rather than decreased, the salaries data does not fit in with the simplistic models."

To make such a claim, the models have to be applicable in this scenario.

So, an assumption made by the commentator is: "More people becoming interested in watching the sport translates to more athletes vying for employment in this sport".

This is the logic behind the correct choice C. Hope this is clear!

Why is choice A incorrect?
 
Does this  have  to be true?

Consider this - We are only given that as more people get interested in watching a sport, the salaries of the athletes involved in that sport tends to increase. This is a fact

BUT  -> For the sports authorities to pay more salary, is it strictly necessary that the revenues increase? What if, despite more people watching the sport out of more interest,

-> the revenue did not increase (they watched for free on Youtube, say, rather than provide revenue)
-> the sports authorities still increased the salaries of the athletes in line with the increasing popularity

For example

Earlier -> 100M USD revenue. 10% of it, 10M USD was paid to 10 athletes (1M USD each)
Now -> more people interested in watching the sport. But revenue is still 100M USD. 40% of it, 40M USD was paid to 10 athletes (4M USD each).

Observe that the commentator really does not have to assume that as revenues increase, salaries increase. Because his argument does not even require that revenues increase.

Hope this helps!

Cheers,
___
Harsha
Enthu about all things GMAT | Exploring the GMAT space | My website: gmatanchor.com

HarshavardhanR · Answer

ravi1522

I Hope the above explanation helps with choice C.

Cheers,
Harsha

rmahe11 · Answer

You cant watch the sport out of interest. Its simple everything is monetizable there are no free lunches . Your basic argument needs more better explanation . I feel A has to be correct

HarshavardhanR · Answer

Hi  rmahe11 ,

Sure. We obviously disagree on the point you have mentioned.

My stand on choice A:   in my book , A is incorrect - such a choice lacks the precision needed for an assumption answer choice (Choice A does not  have to be true  for the conclusion to hold true).

As per me -> 
- The argument only talks about more people becoming interested in a sport. While  typically , more people being interested in a sport translates to more revenue for the sports authority, I cannot really say that this is an absolute certainty.

I maintain that the possibility very well exists that despite more people being interested in watching a sport, the sports authority/industry may not make more revenue.

- This could be a result of a conscious choice to provide free access to watch the sport in a bid to popularize it. Hence, the sports body could be getting more folks interested in watching the sport while not charging anything for it. The body could still be making more profits by reducing costs thanks to economies of scale, without increasing revenue. The possibility, however slim, exists. 
- It could be that more people are getting interested in watching the sport thanks to being able to watch the sport for free through means such as illegal streams on the internet rather than official, monetized channels. 
- Etc.

In my humble opinion, the possibility that more interest does not necessarily generate more revenue is remote, yes, but  within the realm of reason.  Hence, when the argument does not even  strictly  require revenue to increase, an statement about what happens when revenue increases is really not "required" for the argument to hold true. An assumption question usually has a level of strictness attached to it. The negated choice  must  break the conclusion. The choice  must be true  for the conclusion to hold true. Here, that certainty is suspect. I stand by my earlier explanation here.

I would be really wary of such a choice and look for a more legitimate one in the test scenario. Here, we also have a clear winner in choice C.

- In any case, I believe that choice A will fail the negation test, even if we accept that an increase in the number of people interested in watching a sport  definitely  translates to more revenue.

The situation:

- Interest in watching sports increases (given)
- Revenue increases too (because we are considering that increase in interest translates to revenue increase)
- Salaries increase too (given that increased interest is correlated with salary increase)

Negated Choice A:  - "The simplistic economic models  do not  suggest that as revenues in an industry increase, salaries in that industry will rise.

In other words, the models do not say that  if revenues increase, salaries will increase.

So, now, the simplistic models  do not suggest  that if revenues increase, salaries will also increase. But the actual situation here is that when revenue increases, salaries increase too. The models, by not suggesting what is actually happening in the situation, do not seem to be a good fit with the observed salary increase.

At some level, isn't negated choice A actually making us believe more in the conclusion that the salary increase does not fit in with the models (rather than breaking the conclusion)?

I really don't think choice A is correct. But of course, we can agree to disagree if you still think choice A is correct here.

Carry on.

___
Harsha
Enthu about all things GMAT | Exploring the GMAT space | My website: gmatanchor.com

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