When cable TV consumers evade cable access fees by purchasing illegal

Question

When cable TV consumers evade cable access fees by purchasing illegal "pirated" cable boxes, a vicious cycle results. The use of pirated cable boxes by consumers forces cable companies to raise rates, which, in turn, leads more consumers to purchase pirated cable boxes in order to receive free cable programming.

The cycle described above could not result unless which of the following were true?

The cycle described above could not result unless which of the following were true?

A. An increase in cable TV rates causes some consumers to cancel their service or reduce the number of premium channels to which they subscribe.

B. Some methods for detecting and disabling pirated cable boxes are effective at forcing pirated cable TV consumers to pay user fees or forgo cable TV programming, although the success rates vary considerably.

C. When cable TV executives establish cable access fees in order to generate an acceptable level of profit, they do not adequately account for revenue that will be lost through pirated cable use.

D. No one who routinely uses illegal pirated cable boxes can be induced by lower cable access fees to stop using pirated cable boxes unless fines for the use of such boxes are raised at the same time.

E.Cable TV consumers do not differ with respect to the cable access fees that would cause them to consider purchasing illegal pirated cable boxes.

KyleWiddison · Accepted Answer

The OA on this question is C (see this prior forum topic which shows C as OA: when-cable-tv-consumers-evade-cable-access-fees-by-30441.html).

The comment by rait_m is exactly right. This problem is asking you to identify "the assumption" that must be true to cause this cycle of pirating - rate hikes - more pirating - more rate hike - etc. C states that executives do not plan for the lost revenue from pirating. If we negate the assumption, saying that executives DO plan for some level of pirating, the cycle would not exist and we've essentially "destroyed" the conclusion. That makes C the correct answer.

KW

thevenus · Answer

IMO C

(formation of vicious circle formation)
more profit margin->increased cost->tempt the users to use pirated cable->loss to the cable company->loss offsetting;increase in cable fees.

OldFritz · Answer

OA says E, which is questionable.

Question looks like a MGMAT CAT question, for which the answer was B.

Cheers,
Der alte Fritz.

rait_m · Answer

But why not C? The statement says that vicious cycle begins when company needs to raise prices to keep profitability. Profit is only mentioned in C

rohantiwari · Answer

Thanks for the explanation.
I marked c,but got confused by the wrong OA

Triforce · Answer

The logic is: A leads to B leads to A and so on. I.e. the purchase of illegal "pirated" cable boxes leads to higher rates leads to the purchase of illegal "pirated" cable boxes.

An increase in cable TV rates causes some consumers to cancel their service or reduce the number of premium channels to which they subscribe. 
 Wrong.  There may be other reasons for a higher piracy rate than cancellation.

Some methods for detecting and disabling pirated cable boxes are effective at forcing pirated cable TV consumers to pay user fees or forgo cable TV programming, although the success rates vary considerably. 
 Wrong.  Out of scope because the argument says nothing about detecting/disabling pirate boxes.

When cable TV executives establish cable access fees in order to generate an acceptable level of profit, they do not adequately account for revenue that will be lost through pirated cable use. 
 Correct.  If the company would account for the loss to piracy there won't be any need for higher rates after the "piracy adjustment"

No one who routinely uses illegal pirated cable boxes can be induced by lower cable access fees to stop using pirated cable boxes unless fines for the use of such boxes are raised at the same time. 
 Wrong.  This would be the other way round: Less fees -> less piracy -> more rev -> less fees

Cable TV consumers do not differ with respect to the cable access fees that would cause them to consider purchasing illegal pirated cable boxes. 
 Wrong.  Even if they would differ it would be possible that they do not differ enought so that a change to piracy would be prevented.

bugzor · Answer

I disagree with your selection of C. The cable companies are losing money due to piracy. The new rates they charge are based on those losses. This is stated in the passage.

mohnish104 · Answer

Although C is the correct assumption, it does not answer the question asked.

ramannanda9 · Answer

Option B says that:

When cable TV executives establish cable access fees in order to generate an acceptable level of profit, they do not adequately account for revenue that will be lost through pirated cable use ?

If they did account for the loss of revenue through piracy, they would have kept the prices lower and prevented the vicious cycle.

KyleWiddison · Answer

Your explanation is correct and to be clear I think you meant to reference answer choice C, not B. If the effects of piracy are already reflected in the current price there is no need to raise prices due to piracy.

KW

Posted from my mobile device

ramannanda9 · Answer

Yep! typo, this is something to avoid on the examination

KyleWiddison · Answer

Absolutely! It's ok to have that typo on the forum but not when you are taking the test. By the way, I have seen plenty of people work out problems and get the correct answer on their paper but choose the wrong answer - beware!

KW

Posted from my mobile device

KW Posted from my mobile device

SaraLotfy · Answer

can any of the moderators please correct the OA pleaseee

WaterFlowsUp · Answer

Friends, This is a shallow musk of a OG Question. verbal-review-2nd-ed-question-163169.html Consider solving the Official question as well. Regards

semwal · Answer

When cable TV consumers evade cable access fees by purchasing illegal "pirated" cable boxes, a vicious cycle results. The use of pirated cable boxes by consumers forces cable companies to raise rates, which, in turn, leads more consumers to purchase pirated cable boxes in order to receive free cable programming.

The cycle described above could not result unless which of the following were true?

The cycle described above could not result unless which of the following were true?
  THE CYCLE ABOVE COULD NOT RESULT UNLESS.....
1. there is a WAY to stop illegal pirated cable boxes...
2. if while adding profit the subsequent loss due to further piracy was kept in mind in advance....and therefore profit kept to that much minimum level...... .

a. An increase in cable TV rates causes some consumers to cancel their service or reduce the number of premium channels to which they subscribe. ..this will increase piracy...opposite. 
B. Some methods for detecting and disabling pirated cable boxes are effective at forcing pirated cable TV consumers to pay user fees or forgo cable TV programming, although the success rates vary considerably... ....may not work out.... 
C. When cable TV executives establish cable access fees in order to generate an acceptable level of profit, they do not adequately account for revenue that will be lost through pirated cable use. .....may be OK.... 
D. No one who routinely uses illegal pirated cable boxes can be induced by lower cable access fees to stop using pirated cable boxes unless fines for the use of such boxes are raised at the same time... .incorrect.......if there is no way to stop the piracy...cycle described above will result . 
E. Cable TV consumers do not differ with respect to the cable access fees that would cause them to consider purchasing illegal pirated cable boxes.. ..irrelevant... not all reqired to resort to piracy..

AKG1593 · Answer

'The use of pirated cable boxes by consumers forces cable companies to raise rates'
C breaks the cycle of piracy,rate hike-more piracy-more rate hike and so on by saying that the executives plan for revenue lost due to the piracy and price accordingly thus eliminating the need for rate hikes.

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Nightmare007 · Answer

C says: When cable operators keep the existing prices with enough profit margin SO THAT the revenue affected through the Illegal cables is offset . BUT That profit DOES NOT adequately suffice for the revenue lost.
 
ONLY then they will have to increase the charges in turn accelerating the specified vicious cycle.

HENCE, Answer must be C.

richirish · Answer

The OA has to be C, it hits at the core of the conundrum, once the lost access fees are accounted for in future cashflows, there will be no severe price hikes thus ending the vicious cycle.

sony1000 · Answer

I have a follow up question, if the cable TV executives are to stop the vicious cycle, they would still need to raise those fees to account for future lost revenue, but will that really stop the cycle?

When cable TV consumers evade cable access fees by purchasing illegal

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When cable TV consumers evade cable access fees by purchasing illegal

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