PrepTest 30, Section 2, Question 24
Tony: A new kind of videocassette has just been developed. It lasts for only half as many viewings as the old kind does but costs a third as much. Therefore, video rental stores would find it significantly more economical to purchase and stock movies recorded on the new kind of videocassette than on the old kind.
Tony: A new kind of videocassette has just been developed. It lasts for only half as many viewings as the old kind does but costs a third as much. Therefore, video rental stores would find it significantly more economical to purchase and stock movies recorded on the new kind of videocassette than on the old kind.
Anna: But the videocassette itself only accounts for 5 percent of the price a video rental store pays to buy a copy of a movie on video; most of the price consists of royalties the store pays to the studio that produced the movie. So the price that video rental stores pay per copy would decrease by considerably less than 5 percent, and royalties would have to be paid on additional copies.
Tony: A new kind of videocassette has just been developed. It lasts for only half as many viewings as the old kind does but costs a third as much. Therefore, video rental stores would find it significantly more economical to purchase and stock movies recorded on the new kind of videocassette than on the old kind.
Anna: But the videocassette itself only accounts for 5 percent of the price a video rental store pays to buy a copy of a movie on video; most of the price consists of royalties the store pays to the studio that produced the movie. So the price that video rental stores pay per copy would decrease by considerably less than 5 percent, and royalties would have to be paid on additional copies.
Tony: A new kind of videocassette has just been developed. It lasts for only half as many viewings as the old kind does but costs a third as much. Therefore, video rental stores would find it significantly more economical to purchase and stock movies recorded on the new kind of videocassette than on the old kind.
Which one of the following, if true, would contribute most to a defense of Tony's position against Anna's reply?
The price that video rental stores pay for movies recorded on videocassettes is considerably less than the retail price of those movies.
A significant proportion of the movies on videocassette purchased by video rental stores are bought as replacements for worn-out copies of movies the stores already have in stock.
The royalty fee included in the price that video rental stores pay for movies on the new kind of videocassette will be half that included in the price of movies on the old kind.
Given a choice, customers are more likely to buy a movie on videocassette than to rent it if the rental fee is more than half of the purchase price.
Many of the movies rented from video rental stores, particularly children's movies, average several viewings per rental fee.
Explanations
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