Question

The recent upheaval in the office-equipment retail business, in which many small firms have gone out of business, has been attributed to the advent of office equipment "superstores" whose high sales volume keeps their prices low. This analysis is flawed, however, since even today the superstores control a very small share of the retail market. Which of the following, if true, would most weaken the argument that the analysis is flawed?(A) Most of the larger customers for office equipment purchase under contract directly from manufacturers and thus do not participate in the retail market.(B) The superstores’ heavy advertising of their low prices has forced prices down throughout the retail market for office supplies.(C) Some of the superstores that only recently opened have themselves gone out of business.(D) Most of the office equipment superstores are owned by large retailing chains that also own stores selling other types of goods.(E) The growing importance of computers in most offices has changed the kind of office equipment retailers must stock.

Answer 1

Answer:

(B) The superstores’ heavy advertising of their low prices has forced prices down throughout the retail market for office supplies.

Explanation:

If the superstores have the financial means to produce heavy advertising of their low prices, this advertisements will reach a wide group of customers, who will now have lower price expectations for the market of office supplies, whether these are offered by large superstores, or by small retail stores.

Because small retailers likely do not have the economies of scale to allow for prices as low as the large superstores, they have a high probability of being taken out of business.