GMAT Critical Reasoning
Southern Haul Cargo Railway owns all of the railroad tracks in the city of Woe-be-gone, Idaho. Because of Woe-be-gone's sudden population explosion, Southern Haul Cargo is planning to make a Metropolitan Rail and Subway system using its pre-existing tracks. The city council has concluded, however, that if the cargo railway were to offer subway transport, the transport system would have an unfair advantage over the city's existing bus routes, because Southern Haul Cargo's subway system could be subsidized by the profits of their monopoly on cargo transport.
Which of the following, if true, would ease the city's fear of unfair competition?
- A In order to use existing tracks for a passenger transport system, the cargo railway would need to modernize tracks and build stations, a process so expensive it would virtually wipe out all the profit from their monopoly for the foreseeable future.
- B If the cargo railway were to offer subway transport within a particular area, it would have a monopoly within that area.
- C The cost of transport by railway-tracks, whether provided by trains or subway, rises only marginally as more passengers use this form of transport.
- D Bus transport is available for the same subway routes and costs much less. However, it is much slower.
- E Subway transport will never be able to compete with automobile transport, especially as more people have cars now than ever before.
Correct Answer: A