Critical Reasoning

Some airlines allegedly reduce fares on certain routes to a level at which they lose money, in order to drive competitors off those routes. However, this method of eliminating competition cannot be profitable in the long run. Once an airline sucessfully implements this method, any attempt to recoup the earlier losses by charging high fares on that route for an extended period would only provide competitors with a better opportunity to undercut the airline's fares.

Which of the following, if true, most seriously weakens the argument?

A) In some countries it is not illegal for a company to drive away competitors by selling a product below cost.

B) Airline executives generally believe that a company that once underpriced its fares to drive away competitors is very likely to do so again if new competitors emerge.

C) As part of promotions designed to attract new customers, airlines sometimes reduce their ticket prices to below an economically sustainable level.

D) On deciding to stop serving particular routes, most airlines shift resources to other routes rather than reduce the size of their operations.

E) When airlines dramatically reduce their fares on a particular route, the total number of air passengers on that route increases greatly.


OA: B

2mist wrote:Some airlines allegedly reduce fares on certain routes to a level at which they lose money, in order to drive competitors off those routes. However, this method of eliminating competition cannot be profitable in the long run. Once an airline sucessfully implements this method, any attempt to recoup the earlier losses by charging high fares on that route for an extended period would only provide competitors with a better opportunity to undercut the airline's fares.

Which of the following, if true, most seriously weakens the argument?

A) In some countries it is not illegal for a company to drive away competitors by selling a product below cost.

B) Airline executives generally believe that a company that once underpriced its fares to drive away competitors is very likely to do so again if new competitors emerge.

C) As part of promotions designed to attract new customers, airlines sometimes reduce their ticket prices to below an economically sustainable level.

D) On deciding to stop serving particular routes, most airlines shift resources to other routes rather than reduce the size of their operations.

E) When airlines dramatically reduce their fares on a particular route, the total number of air passengers on that route increases greatly.

Plan: Airline X will reduce fares and temporarily operate at a loss in order to push competitors off certain routes.
Conclusion: The plan will NOT lead to long-term profits.
Assumption: When Airline X raises fares back up to profitable levels, competitors will reenter the market, preventing Airline X from generating profits.

To weaken the conclusion, the correct answer choice will attack the assumption that competitors will reenter the market and prevent Airline X from generating long-term profits.
In other words, the correct answer choice will show that Airline X WILL be able to generate long-term profits,

B: Airline executives generally believe that a company that once underpriced its fares to drive away competitors is very likely to do so again if new competitors emerge.
This answer choice explains why competitors are unlikely to reenter the market once Airline X raises its fares back up to profitable levels: to do so will simply induce Airline X to underprice its fares again.
Why rejoin a route that Airline X is willing to service at a loss?

The correct answer is B.

A: In some countries it is not illegal for a company to drive away competitors by selling a product below cost.
The legality of Airline X's plan is irrelevant.

C: As part of promotions designed to attract new customers, airlines sometimes reduce their ticket prices to below an economically sustainable level.
This answer choice could STRENGTHEN the conclusion that Airline X will not be able to generate profits.

D: On deciding to stop serving particular routes, most airlines shift resources to other routes rather than reduce the size of their operations.
In suggesting that Airline X's competitors will remain strong, this answer choice could STRENGTHEN the conclusion that Airline X will not be able to generate profits.

E: When airlines dramatically reduce their fares on a particular route, the total number of air passengers on that route increases greatly.
Since the route will be serviced at a LOSS, more passengers = more losses, potentially STRENGTHENING the conclusion that Airline X will not be able to generate profits.

GMATGuruNY wrote:

2mist wrote:Some airlines allegedly reduce fares on certain routes to a level at which they lose money, in order to drive competitors off those routes. However, this method of eliminating competition cannot be profitable in the long run. Once an airline sucessfully implements this method, any attempt to recoup the earlier losses by charging high fares on that route for an extended period would only provide competitors with a better opportunity to undercut the airline's fares.

Which of the following, if true, most seriously weakens the argument?

A) In some countries it is not illegal for a company to drive away competitors by selling a product below cost.

B) Airline executives generally believe that a company that once underpriced its fares to drive away competitors is very likely to do so again if new competitors emerge.

C) As part of promotions designed to attract new customers, airlines sometimes reduce their ticket prices to below an economically sustainable level.

D) On deciding to stop serving particular routes, most airlines shift resources to other routes rather than reduce the size of their operations.

E) When airlines dramatically reduce their fares on a particular route, the total number of air passengers on that route increases greatly.

Plan: Airline X will reduce fares and temporarily operate at a loss in order to push competitors off certain routes.
Conclusion: The plan will NOT lead to long-term profits.
Assumption: When Airline X raises fares back up to profitable levels, competitors will reenter the market, preventing Airline X from generating profits.

To weaken the conclusion, the correct answer choice will attack the assumption that competitors will reenter the market and prevent Airline X from generating long-term profits.
In other words, the correct answer choice will show that Airline X WILL be able to generate long-term profits,

B: Airline executives generally believe that a company that once underpriced its fares to drive away competitors is very likely to do so again if new competitors emerge.
This answer choice explains why competitors are unlikely to reenter the market once Airline X raises its fares back up to profitable levels: to do so will simply induce Airline X to underprice its fares again.
Why rejoin a route that Airline X is willing to service at a loss?

The correct answer is B.

A: In some countries it is not illegal for a company to drive away competitors by selling a product below cost.
The legality of Airline X's plan is irrelevant.

C: As part of promotions designed to attract new customers, airlines sometimes reduce their ticket prices to below an economically sustainable level.
This answer choice could STRENGTHEN the conclusion that Airline X will not be able to generate profits.

D: On deciding to stop serving particular routes, most airlines shift resources to other routes rather than reduce the size of their operations.
In suggesting that Airline X's competitors will remain strong, this answer choice could STRENGTHEN the conclusion that Airline X will not be able to generate profits.

E: When airlines dramatically reduce their fares on a particular route, the total number of air passengers on that route increases greatly.
Since the route will be serviced at a LOSS, more passengers = more losses, potentially STRENGTHENING the conclusion that Airline X will not be able to generate profits.

Hi Mitch,

Thanks for your quick response.
Now, I can discern the logic behind option B and it is sure of a weakener, yet I can't see how option D is a strengthener.

My reasoning for option D :

Initially, the airline, say Mitch airways, reduces its fair below the profit margin, as a result all the competitors leaves that particular route completely, so when Mitch airways raises its fair back to profitable level, there is no one to compete and it will certainly generate profit.

This logic is strengthened by option D which say because of Mitch airways strategy all other airways didn't reduct their size of operation but left that particular route all together, leaving only Mitch airways as the only service provider.

Had other service providers not left the route but reduced their services, then doubt could be cased that when Mitch airways raises its fair, its competitors will have have edge and Mitch airways may not profit.


Regards,
Mist