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Bluecorp

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Bluecorp

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Industry analysts feel that Bluecorp paid far too much to acquire
rival …rm Strickland. While doing so limited competition they face
in the marketplace, this approach cannot be pro…table in the long
run. Once two rival …rms merge in order to increase pro…ts, the
higher prices would only provide other competitors an opportunity
to enter the …eld at a lower price, cutting into Bluecorp's pro…ts
and making the acquisition of Strickland an expensive mistake.
Which of the following, if true, most seriously weakens the
argument?
(A) In some countries it is legal for two companies to merge
even if the resulting entity would nearly monopolize the
market.
(B) The combination of Bluecorp and Strickland creates an
entity whose size allows it to produce items at a far lower
cost than could any smaller enterprise.
(C) In addition to eliminating competition, Bluecorp's
acquisition gives it a much more substantial presence
in urban areas.
(D) As a result of the acquisition, the new corporate entity
will create two smaller entities to operate as independent
suppliers to Bluecorp.
(E) When two large companies in the same …eld combine,
entrepreneurs tend to shy away from the …eld due to the
single entity's perceived dominance.


Confuse between B and E

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Hi Gasg,

Here are my notes for this passage:

-Conclusion: Bluecorp acquiring Strickland = NOT profitable long-term
(author concedes it DID limit competition)

-Evidence: Higher prices gives competitors opportunity

-Assumption: That the merger = higher prices

The question asks which answer choice would "weaken" the argument, so my prediction is something that shows the merger resulting in LOWER prices for Bluecorp.

Let's look at the choices:

(A) The legality of the merger is irrelevant to the argument
(B) This correctly weakens the argument! "Lower cost" correctly refutes the "higher prices" in the assumption.
(C) Bluecorp's presence in urban areas is irrelevant to the argument.
(D) Independent suppliers are irrelevant to the argument.
(E) The focus here is on the entrepreneurs "shying away" - it doesn't weaken the argument, which focuses on the merger = higher prices.

You might like to check out this article I wrote recently on CR strategy: http://www.beatthegmat.com/mba/2010/11/18/complete-the-passage-questions

Hope that helps!

-Vivian

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to make it more readable:

gasg wrote:
Industry analysts feel that Bluecorp paid far too much to acquire
rival …firm Strickland. While doing so limited competition they face
in the marketplace, this approach cannot be profi…table in the long
run. Once two rival …firms merge in order to increase pro…ts, the
higher prices would only provide other competitors an opportunity
to enter the …field at a lower price, cutting into Bluecorp's pro…fits
and making the acquisition of Strickland an expensive mistake.
Which of the following, if true, most seriously weakens the
argument?
(A) In some countries it is legal for two companies to merge
even if the resulting entity would nearly monopolize the
market.
(B) The combination of Bluecorp and Strickland creates an
entity whose size allows it to produce items at a far lower
cost than could any smaller enterprise.
(C) In addition to eliminating competition, Bluecorp's
acquisition gives it a much more substantial presence
in urban areas.
(D) As a result of the acquisition, the new corporate entity
will create two smaller entities to operate as independent
suppliers to Bluecorp.
(E) When two large companies in the same …field combine,
entrepreneurs tend to shy away from the …field due to the
single entity's perceived dominance.


Confuse between B and E
I follow Vivian, and think answer B should be set as fort-post against the conclusion in passage.

@Vivian, checked your article featured under Grockit's at BTG. I would say sometimes question stem completes the passage; hence conclusion and related assumptions might be extended to question stem (this note is made only about the question stem, not answer choices).

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Hi Can u reaveal the source ?

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mundasingh123 wrote:
Hi Can u reaveal the source ?
I have exercised with this problem in GMAT-Hacks Total GMAT Verbal

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Night reader wrote:
mundasingh123 wrote:
Hi Can u reaveal the source ?
I have exercised with this problem in GMAT-Hacks Total GMAT Verbal

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"... higher prices would only provide other competitors an opportunity to enter the …field at a lower price"

The passage just says "other competitors" without specifying 'smaller' or 'bigger'
B will not weaken if an entity larger than bluecorp or even the same size as bluecorp enters the field as b is restricted to "smaller enterprises"

E nips everything in the bud --- doesnt matter if the entity is larger or smaller -- no entrepreneur dares to even enter the field... This seems to me to be a much stronger weakening argument

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Conclusion of argument : Acquisition = long term profit is not a good idea because it leads to competition that helps to increase lower price products.

Reasons why answer choice E can be wrong:
1. argument doesn't say that two companies are large ones in the same field.
2. 'Tend' seems to be very light as compared with 'far lower cost' in answer choice B

Reason why I thought answer choice E can be a contender.
1. I will avoid competition

Please let me know if I am correct.

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gauravgundal wrote:
Conclusion of argument : Acquisition = long term profit is not a good idea because it leads to competition that helps to increase lower price products.

Reasons why answer choice E can be wrong:
1. argument doesn't say that two companies are large ones in the same field.
2. 'Tend' seems to be very light as compared with 'far lower cost' in answer choice B

Reason why I thought answer choice E can be a contender.
1. I will avoid competition

Please let me know if I am correct.
Argument: Bluecorp and Strickland merger will not help increase the profits, as it allows the other competitors to enter the market at LOWER PRICES.

So, to weaken, you need to show that the merged firm CAN produce the items at lower cost (One more way to weaken the argument is show that there are no other competitors). B does exactly that.

E is not related to argument at all. Argument is about Bluecorp and Strickland merger, and the option E is a very generic statement, not affecting the argument.

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