Multiple choice

Directions: Read the passage/argument and answer the question that follows it.

Small companies are always very defensive in terms of protecting their own turf. They tend to firmly resist any attempt at invasion of their territory by another bigger rival company and will do their best to avert it from happening. They quote examples to prove that such incursions have invariably eaten into their market shares and consequently, profits. They fail to realize that ultimately, competition is going to do a whole world of good to their operations.

Which of the following will tend to support most the standpoint of small companies?

  1. Many small firms have gone down under once bigger firms entered their arena of operation.

  2. The average rate of profit growth for small companies has always fallen by a significant margin every time the sector has seen a new, bigger entrant.

  3. There has been no change in the profit levels of bigger entrants which invade the territory of small firms.

  4. Small companies typically form a cartel to meet the onslaught of bigger companies more effectively.

  5. The Competition Promotion Council has mandated that in future, the bigger companies will not be allowed to enter any product area wherein more than 70% market share is held by small companies.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Option (1), which highlights the fact of small firms going down under as a consequence of the entry of bigger players, carries the idea too far. The only claim being made by small companies is that they suffer decline in profits in such situations. Besides, it is many, not all companies, which makers it doubly wrong as an answer choice. Option (3) tends to weaken the small companies viewpoint. Hence, it ruled out. Option (4) makes an irrelevant remark which ahs no bearing on the question. Option (5) is putting a big rider on the entry of bigger players and in fact, will not be universally applicable. So the extent of application of this provision is not known. The correct option (2) is in line with the point raised by small companies given in the paragraph and is therefore, the best possible choice.

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