#9 - Jean: Our navigational equipment sells for $1,100 and dominates the high end of the market, but

[Administrator]

Complete Question Explanation

Point at Issue Questions. The correct answer choice is (D).

Answer choice (A):

Answer choice (B):

Answer choice (C):

Answer choice (D): This is the correct answer choice.

Answer choice (E):

This explanation is still in progress. Please post any questions below!

[Linabear218]

Hello!

Could someone explain why A is incorrect?
Thank you

[Adam Tyson]

Answer A is about profits, Linabear218, but the evidence in the stimulus is only about sales and market share. The authors of the test love to try confusing us with those concepts, because many students overlook the differences between them.

Sales, or revenues, is just a measure of money coming into a business. If you sell 1000 widgets for $1 apiece, your revenue is $1000. But profit is that revenue minus whatever costs you incurred in producing and selling those widgets. If it cost you $800 to make and market those widgets, then your profit is only $200, even though you have revenue of $1000.

And market share is not about sales or profits, but only about what percentage of the total market a company has. If every year, 10,000 widgets are sold, and Company A sells 1000 of those widgets, their market share is 10% by volume. Market share can also be measured by revenues - if the market for widgets is $10,000 annually, and Company A sells $2000 worth of widgets, their share of the market by revenue is 20%. But a market share figure will not tell you anything about sales or profits, because those are different issues. Knowing that Company A is dominating the market might mean that they have the largest market share of all the businesses in that industry, but it tells you nothing at all about profits. They might be making very little profit, or even losing money!

Maybe the profits are higher on the high-end products? Maybe not? We just can't say for sure, and neither speaker takes a position on profits. They are only arguing about sales and market share (whether they will dominate the market or become less competitive). That's why answer A is not the point at issue, and is not the correct answer.

[bonbon94]

I was stuck between D and C. Originally I chose D but doubted myself and thought it could be C because D seemed to definite. Can you help explain the difference between answer C and D and why the answer is D

[Luke Haqq]

Hi bonbon94!

To see why answer choice (D) is correct, you could put an J and a T next to the answer choice to represent both speakers. Then, ask whether each speaker would agree or disagree with the statement. (D) states that "The company would no longer dominate the high-cost market if it began selling a low-cost model." J would disagree with this statement (J thinks they can "continue[e] to dominate the high end" while selling a low-cost model). By contrast, T would agree with the statement--T thinks selling the low-cost model will hurt overall sales and thus dominance in the market. This confirms that it's the correct answer choice.

We don't similarly have a disagreement between J and T over answer choice (C). Answer choice (C) states that "The company could dominate the low-cost market in the same way it has dominated the high-cost market." On my reading of the stimulus, we don't know the views of either speaker on that issue. Because of that, it can't be the correct answer for a point at issue question.