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# When the products of several competing suppliers are perceived by

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Intern
Joined: 01 Aug 2014
Posts: 37
Re: When the products of several competing suppliers are perceived by  [#permalink]

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21 Dec 2015, 02:21
Premise: Supplier’s produce perceived the same by customers – Classical economics predict: price will reduce to the same minimal level – profits the same minimal level.
Conclusion: If predict truly, to make as much as profit, it should:
Choice A, D and E out because as classical economics predict price cannot change
Choice B, if a market less crowded, the profits will increase not decrease as mentioned.
Choice C, if supplier cannot convince that their products are different from others (this factors the classical economics not mention), they will sell more – lead to increase profit.
Director
Joined: 04 Jun 2016
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GMAT 1: 750 Q49 V43
Re: When the products of several competing suppliers are perceived by  [#permalink]

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10 Jul 2016, 12:26
1
THE ANSWER IS C

Lets deconstruct the argument

CLASSICAL ECONOMICS
Similar product= Same price range=Similar (and less) profit for every manufacturer.

By following the rule of classical economics
Different product= Not the same price range= Not the same profit anymore

What should a manufacturer do to earn more profit. He should break the customers notion of his product being just another similar product that are already in the market.
HOW TO BREAK THIS NOTION:- By convincing the customer that his product is not similar to other products and thats why it is sold at a different price (higher price to be precise)

C) Each supplier in a crowded market will try to convince consumers that its product differs significantly from its competitors’ products.

C is the correct answer

mojorising800 wrote:
Which of the following best completes the passage below?
When the products of several competing suppliers are perceived by consumers to be essentially the same,
classical economics predicts that price competition will reduce prices to the same minimal levels and all
suppliers’ profits to the same minimal levels. Therefore, if classical economics is true, and given suppliers’
desire to make as much profit as possible, it should be expected that .
(A) in a crowded market widely differing prices will be charged for products that are essentially the same as
each other
(B) as a market becomes less crowded as suppliers leave, the profits of the remaining suppliers will tend to
decrease
(C) each supplier in a crowded market will try to convince consumers that its product differs significantly from
its competitors’ products.
(D) when consumers are unable to distinguish the products in a crowded market, consumers will judge that
the higher-priced products are of higher quality
(E) suppliers in crowded markets will have more incentive to reduce prices and thus increase sales than to
introduce innovations that would distinguish their product from their competitors’ products

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Re: When the products of several competing suppliers are perceived by  [#permalink]

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23 Jul 2016, 07:07
ddg wrote:
This question is awesome
----------------------------------------------------------------
Sometimes, pre-thinking works and sometimes people get confused between choices. What happened to me was I got confused between C and E.

Now, one clue (and that is the best hint in CR inference type qns) is: When customers perceive all the products to be same they choose the lowest priced one.

C ---> If suppliers promote their "unique" features ---> Compelling customers to notice the product ---> into buying the product ---> More sales ---> More Profit

E ---> nothing new in product ---> Can be ignored by customers ---> Profit - (increase) plan fails.

So Ans: C

---------------------------------------------
If you can't do it now, you can do it tomorrow, all you need is persistence

Price competition will reduce prices - part of argument
How C is correct stating 'unique features' ?
Director
Joined: 02 Sep 2016
Posts: 649
Re: When the products of several competing suppliers are perceived by  [#permalink]

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01 Jun 2017, 03:51
When the products of several competing suppliers are perceived by consumers to be essentially the same,
classical economics predicts that price competition will reduce prices to the same minimal levels and all
suppliers’ profits to the same minimal levels. Therefore, if classical economics is true, and given suppliers’
desire to make as much profit as possible, it should be expected that .

1) Prices are now same
2) Profits are same
3) Question is what will help these suppliers' increase their profits?

When in a market price and profits become same, customers judge products by their quality.

(A) in a crowded market widely differing prices will be charged for products that are essentially the same as each other

We already know that prices do not differ much. INCORRECT

(B) as a market becomes less crowded as suppliers leave, the profits of the remaining suppliers will tend to decrease
Fine but how do these suppliers attract customers in order to make profits?

(C) each supplier in a crowded market will try to convince consumers that its product differs significantly from its competitors' products.
Exactly!!

(D) when consumers are unable to distinguish the products in a crowded market, consumers will judge that the higher-priced products are of higher quality
Prices are almost same. INCORRECT

(E) suppliers in crowded markets will have more incentive to reduce prices and thus increase sales than to introduce innovations that would distinguish their product from their competitors
Every supplier will do the same thing. We know that prices are already low, then how low ? Does not help much.
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Intern
Joined: 12 Mar 2017
Posts: 39
Re: When the products of several competing suppliers are perceived by  [#permalink]

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27 Jul 2017, 08:48
Which of the following best completes the passage below?

When the products of several competing suppliers are perceived by consumers to be essentially the same, classical economics predicts that price competition will reduce prices to the same minimal levels and all suppliers’ profits to the same minimal levels. Therefore, if classical economics is true, and given suppliers’ desire to make as much profit as possible, it should be expected that ____________

(A) in a crowded market widely differing prices will be charged for products that are essentially the same as each other
This is exact opposite of what classic theory states.

(B) as a market becomes less crowded as suppliers leave, the profits of the remaining suppliers will tend to decrease
Exact opposite of what classical theory states

(C) each supplier in a crowded market will try to convince consumers that its product differs significantly from its competitors’ products.
Because their products are same and because of that they are having drooping profit level, they will try and distinguish their product or their style. We see that in our every day life!

(D) when consumers are unable to distinguish the products in a crowded market, consumers will judge that the higher-priced products are of higher quality.
We can't really predict the higher priced products demand. This is out of scope.

(E) suppliers in crowded markets will have more incentive to reduce prices and thus increase sales than to introduce innovations that would distinguish their product from their competitors’ products
Introducing innovation to distinguish their competitiors product is out of scope. What is these suppliers are the middle men and do not have the authority to introduce innovation.
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Location: United States (NC)
Re: When the products of several competing suppliers are perceived by  [#permalink]

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29 Oct 2018, 02:27
1
Bunuel,

Can this tagged to " Complete the Passage " Section
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Probus

~You Just Can't beat the person who never gives up~ Babe Ruth
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Re: When the products of several competing suppliers are perceived by  [#permalink]

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29 Oct 2018, 02:34
Probus wrote:
Bunuel,

Can this tagged to " Complete the Passage " Section

________________
Done. Thank you.
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Re: When the products of several competing suppliers are perceived by   [#permalink] 29 Oct 2018, 02:34

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# When the products of several competing suppliers are perceived by

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