QUESTION TEXT: From time to time there is a…
QUESTION TYPE: Necessary Assumption
CONCLUSION: There’s no problem with predatory pricing.
REASONING: The threat of competition will keep companies from raising prices, even if their competitors go out of business.
ANALYSIS: On necessary assumption questions, you must ask how the evidence could fail to justify the argument. What is the author assuming?
Here, they’re assuming that competition would work. But if competitors can’t enter the market, then this argument falls apart.
- The argument said the threat of competition is what keeps companies from raising prices. Actual competition is not necessarily required.
Negation: Some successful companies may avoid creating competitors.
- “Unlikely” and “Likely” are related to most. Likely = 51%, unlikely = 50% or less. Since you must negate in the slightest way possible, negating unlikely means moving from 50% to 51%, which is never a significant change.
Negation: It is likely that multiple companies will engage in predatory pricing.
- Company size wasn’t relevant. The issue is lack of competition. In a small market a company might drive out all competitors even if it isn’t that big.
Negation: At least one company that isn’t large and wealthy can engage in predatory pricing.
- Negating this makes the argument stronger! Additional reasons to avoid raising prices mean we don’t need to worry about predatory pricing.
Negation: There is at least one other reason companies avoid raising prices (e.g. Compassion, legal requirements, cost of changing ads, etc.)
- CORRECT. The author assumed that prices are the only reason we should worry about predatory pricing. There could be other reasons. Maybe predatory pricing is not fair to competitors.
Negation: Some pricing practices are unacceptable even if they do not result in unreasonable prices.
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