All Courses
Explore Courses UPSC Exam UPSC Test Series Free Notes EduRev Infinity Get the App Login Join for Free
Sign in Open App
GMAT Exam  >  GMAT Questions  >  Firms adopting “profit-related-pay&rdqu... Start Learning for Free
SaveJoin the Discussion on the App
Firms adopting “profit-related-pay” (PRP) contracts pay wages at levels that vary with the firm’s profits. In the metalworking industry last year, firms with PRP contracts in place showed productivity per worker on average 13 percent higher than that of their competitors who used more traditional contracts. 
Q. If, on the basis of the evidence above, it is argued that PRP contracts increase worker productivity, which of the following, if true, would most seriously weaken that argument?
  • a)
    Results similar to those cited for the metal-working industry have been found in other industries where PRP contracts are used.
  • b)
    Under PRP contracts costs other than labor costs, such as plant, machinery, and energy, make up an increased proportion of the total cost of each unit of output.
  • c)
    Because introducing PRP contracts greatly changes individual workers’ relationships to the firm, negotiating the introduction of PRP contracts in complex and time consuming.
  • d)
    Many firms in the metalworking industry have modernized production equipment in the last five years, and most of these introduced PRP contracts at the same time.
  • e)
    In firms in the metalworking industry where PRP contracts are in place, the average take-home pay is 15 percent higher than it is in those firms where workers have more traditional contracts.
Correct answer is option 'D'. Can you explain this answer?
FREE This question is part of
Download PDF Attempt Test
Download PDF Attempt this Test
Verified Answer
Firms adopting “profit-related-pay” (PRP) contracts pay wa...
According to choice D, many firms with PRP contracts also have modernized equipment. Since the cause of their improved productivity might be the modernized equipment, not the PRP contracts, this weakens the argument, so D is the best answer.
Choice A does not weaken the argument: it is merely more evidence of the sort already being used. Choice B is incorrect because it is a natural consequence of increased worker productivity if other costs remain stable. Choice C is incorrect because it explains why introducing PRP contracts is difficult, but says nothing about the results of doing so. Choice E is incorrect because it is not implausible that workers’ pay should roughly correspond to their productivity.
View all questions of this test
Most Upvoted Answer
Firms adopting “profit-related-pay” (PRP) contracts pay wa...
Understanding the Argument
The argument suggests that PRP contracts enhance worker productivity, illustrated by a 13% productivity increase in the metalworking industry. To weaken this conclusion, we need evidence that challenges the direct link between PRP contracts and productivity.
Why Option D Weakens the Argument
Option D states that many firms in the metalworking industry have modernized production equipment in the last five years, coinciding with the introduction of PRP contracts. This information is critical because:
- Alternative Explanation: The productivity increase could be attributed to the modernization of production equipment rather than the PRP contracts themselves. If firms are investing in new technology, it’s plausible that this investment is the primary driver of increased productivity.
- Confounding Factors: The simultaneous implementation of PRP contracts and equipment upgrades creates a confounding factor. Without isolating the effects of each change, it’s difficult to conclude that PRP contracts are the sole reason for higher productivity.
- Implications for Future Studies: If future studies show that firms with both modern equipment and PRP contracts experience similar productivity gains, it becomes challenging to establish a causal relationship between PRP contracts and productivity.
Conclusion
In summary, option D introduces an alternative explanation for the observed productivity increase, thereby weakening the assertion that PRP contracts are the primary cause of enhanced worker performance in the metalworking industry. This highlights the importance of considering all variables when evaluating the effectiveness of compensation strategies.
Attention GMAT Students!
To make sure you are not studying endlessly, EduRev has designed GMAT study material, with Structured Courses, Videos, & Test Series. Plus get personalized analysis, doubt solving and improvement plans to achieve a great score in GMAT.
< Previous Question Next Question >
Explore Courses for GMAT exam

Similar GMAT Doubts

Read the passage and answer the question given below.American companies may find the solution to their performance related problems in their own backyard. A recently conducted independent study shows that in the business world, social and political skills have become the real key to getting ahead in organisations, skills that successful managers use to their advantage. The study found out that successful managers, those who get promoted relatively quickly vis-à-vis effective managers, perform day to day activities that are more or less dissimilar to the ones conducted by effective managers or those who have satisfied, committed subordinates, in addition to high performing units. Accordingly, it comes as no surprise that networking, which consists of socializing or politicking and interacting with others, was one activity that, out of the core four activities among the plethora of activities performed by managers, topped the list for successful managers but was ranked the lowest in the list of activities performed by the effective ones. Indeed the findings of the study do not negate the reality that there are managers who strike a balance between the activities performed by both types of managers and hence are successful and effective at the same time, but the meagre percentage such managers formed of the study’s sample, barely ten percent, affirms the general divide between successful and effective managers.These findings clearly belie the traditional assumption typically suggested by formal personnel policies that promotions are based purely on performance. In effect, the study’s implications affirm the cynical, yet what now seems real, view that people who are not necessarily the most accomplishing in terms of performing well in the other three key activity areas, namely communication, traditional management, and human resource management, are being promoted to the top level. Therefore, American companies looking to improve their performance and productivity need to ensure that formal rewards, especially promotions, are tied to performance. This way companies will be promoting a work-culture that turns effective managers in to successful managers and gives the currently successful managers a chance to effectively focus on productivity and not just on socializing and politicking.Q. Which of the following is mentioned in the passage?

American companies may find the solution to their performance related problems in their own backyard. A recently conducted independent study shows that in the business world, social and political skills have become the real key to getting ahead in organisations, skills that successful managers use to their advantage. The study found out that successful managers, those who get promoted relatively quickly vis--vis effective managers, perform day to day activities that are more or less dissimilar to the ones conducted by effective managers or those who have satisfied, committed subordinates, in addition to high performing units. Accordingly, it comes as no surprise that networking, which consists of socializing or politicking and interacting with others, was one activity that, out of the core four activities among the plethora of activities performed by managers, topped the list for successful managers but was ranked the lowest in the list of activities performed by the effective ones. Indeed the findings of the study do not negate the reality that there are managers who strike a balance between the activities performed by both types of managers and hence are successful and effective at the same time, but the meagre percentage such managers formed of the studys sample, barely ten percent, affirms the general divide between successful and effective managers.These findings clearly belie the traditional assumption typically suggested by formal personnel policies that promotions are based purely on performance. In effect, the studys implications affirm the cynical, yet what now seems real, view that people who are not necessarily the most accomplishing in terms of performing well in the other three key activity areas, namely communication, traditional management, and human resource management, are being promoted to the top level. Therefore, American companies looking to improve their performance and productivity need to ensure that formal rewards, especially promotions, are tied to performance. This way companies will be promoting a work-culture that turns effective managers in to successful managers and gives the currently successful managers a chance to effectively focus on productivity and not just on socializing and politicking.Which of the following is mentioned in the passage?

Top Courses for GMATView all

Top Courses for GMAT

Firms adopting “profit-related-pay” (PRP) contracts pay wages at levels that vary with the firm’s profits. In the metalworking industry last year, firms with PRP contracts in place showed productivity per worker on average 13 percent higher than that of their competitors who used more traditional contracts.Q. If, on the basis of the evidence above, it is argued that PRP contracts increase worker productivity, which of the following, if true, would most seriously weaken that argument?a)Results similar to those cited for the metal-working industry have been found in other industries where PRP contracts are used.b)Under PRP contracts costs other than labor costs, such as plant, machinery, and energy, make up an increased proportion of the total cost of each unit of output.c)Because introducing PRP contracts greatly changes individual workers’ relationships to the firm, negotiating the introduction of PRP contracts in complex and time consuming.d)Many firms in the metalworking industry have modernized production equipment in the last five years, and most of these introduced PRP contracts at the same time.e)In firms in the metalworking industry where PRP contracts are in place, the average take-home pay is 15 percent higher than it is in those firms where workers have more traditional contracts.Correct answer is option 'D'. Can you explain this answer?
Question Description
Firms adopting “profit-related-pay” (PRP) contracts pay wages at levels that vary with the firm’s profits. In the metalworking industry last year, firms with PRP contracts in place showed productivity per worker on average 13 percent higher than that of their competitors who used more traditional contracts.Q. If, on the basis of the evidence above, it is argued that PRP contracts increase worker productivity, which of the following, if true, would most seriously weaken that argument?a)Results similar to those cited for the metal-working industry have been found in other industries where PRP contracts are used.b)Under PRP contracts costs other than labor costs, such as plant, machinery, and energy, make up an increased proportion of the total cost of each unit of output.c)Because introducing PRP contracts greatly changes individual workers’ relationships to the firm, negotiating the introduction of PRP contracts in complex and time consuming.d)Many firms in the metalworking industry have modernized production equipment in the last five years, and most of these introduced PRP contracts at the same time.e)In firms in the metalworking industry where PRP contracts are in place, the average take-home pay is 15 percent higher than it is in those firms where workers have more traditional contracts.Correct answer is option 'D'. Can you explain this answer? for GMAT 2024 is part of GMAT preparation. The Question and answers have been prepared according to the GMAT exam syllabus. Information about Firms adopting “profit-related-pay” (PRP) contracts pay wages at levels that vary with the firm’s profits. In the metalworking industry last year, firms with PRP contracts in place showed productivity per worker on average 13 percent higher than that of their competitors who used more traditional contracts.Q. If, on the basis of the evidence above, it is argued that PRP contracts increase worker productivity, which of the following, if true, would most seriously weaken that argument?a)Results similar to those cited for the metal-working industry have been found in other industries where PRP contracts are used.b)Under PRP contracts costs other than labor costs, such as plant, machinery, and energy, make up an increased proportion of the total cost of each unit of output.c)Because introducing PRP contracts greatly changes individual workers’ relationships to the firm, negotiating the introduction of PRP contracts in complex and time consuming.d)Many firms in the metalworking industry have modernized production equipment in the last five years, and most of these introduced PRP contracts at the same time.e)In firms in the metalworking industry where PRP contracts are in place, the average take-home pay is 15 percent higher than it is in those firms where workers have more traditional contracts.Correct answer is option 'D'. Can you explain this answer? covers all topics & solutions for GMAT 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Firms adopting “profit-related-pay” (PRP) contracts pay wages at levels that vary with the firm’s profits. In the metalworking industry last year, firms with PRP contracts in place showed productivity per worker on average 13 percent higher than that of their competitors who used more traditional contracts.Q. If, on the basis of the evidence above, it is argued that PRP contracts increase worker productivity, which of the following, if true, would most seriously weaken that argument?a)Results similar to those cited for the metal-working industry have been found in other industries where PRP contracts are used.b)Under PRP contracts costs other than labor costs, such as plant, machinery, and energy, make up an increased proportion of the total cost of each unit of output.c)Because introducing PRP contracts greatly changes individual workers’ relationships to the firm, negotiating the introduction of PRP contracts in complex and time consuming.d)Many firms in the metalworking industry have modernized production equipment in the last five years, and most of these introduced PRP contracts at the same time.e)In firms in the metalworking industry where PRP contracts are in place, the average take-home pay is 15 percent higher than it is in those firms where workers have more traditional contracts.Correct answer is option 'D'. Can you explain this answer?.
Solutions for Firms adopting “profit-related-pay” (PRP) contracts pay wages at levels that vary with the firm’s profits. In the metalworking industry last year, firms with PRP contracts in place showed productivity per worker on average 13 percent higher than that of their competitors who used more traditional contracts.Q. If, on the basis of the evidence above, it is argued that PRP contracts increase worker productivity, which of the following, if true, would most seriously weaken that argument?a)Results similar to those cited for the metal-working industry have been found in other industries where PRP contracts are used.b)Under PRP contracts costs other than labor costs, such as plant, machinery, and energy, make up an increased proportion of the total cost of each unit of output.c)Because introducing PRP contracts greatly changes individual workers’ relationships to the firm, negotiating the introduction of PRP contracts in complex and time consuming.d)Many firms in the metalworking industry have modernized production equipment in the last five years, and most of these introduced PRP contracts at the same time.e)In firms in the metalworking industry where PRP contracts are in place, the average take-home pay is 15 percent higher than it is in those firms where workers have more traditional contracts.Correct answer is option 'D'. Can you explain this answer? in English & in Hindi are available as part of our courses for GMAT. Download more important topics, notes, lectures and mock test series for GMAT Exam by signing up for free.
Here you can find the meaning of Firms adopting “profit-related-pay” (PRP) contracts pay wages at levels that vary with the firm’s profits. In the metalworking industry last year, firms with PRP contracts in place showed productivity per worker on average 13 percent higher than that of their competitors who used more traditional contracts.Q. If, on the basis of the evidence above, it is argued that PRP contracts increase worker productivity, which of the following, if true, would most seriously weaken that argument?a)Results similar to those cited for the metal-working industry have been found in other industries where PRP contracts are used.b)Under PRP contracts costs other than labor costs, such as plant, machinery, and energy, make up an increased proportion of the total cost of each unit of output.c)Because introducing PRP contracts greatly changes individual workers’ relationships to the firm, negotiating the introduction of PRP contracts in complex and time consuming.d)Many firms in the metalworking industry have modernized production equipment in the last five years, and most of these introduced PRP contracts at the same time.e)In firms in the metalworking industry where PRP contracts are in place, the average take-home pay is 15 percent higher than it is in those firms where workers have more traditional contracts.Correct answer is option 'D'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of Firms adopting “profit-related-pay” (PRP) contracts pay wages at levels that vary with the firm’s profits. In the metalworking industry last year, firms with PRP contracts in place showed productivity per worker on average 13 percent higher than that of their competitors who used more traditional contracts.Q. If, on the basis of the evidence above, it is argued that PRP contracts increase worker productivity, which of the following, if true, would most seriously weaken that argument?a)Results similar to those cited for the metal-working industry have been found in other industries where PRP contracts are used.b)Under PRP contracts costs other than labor costs, such as plant, machinery, and energy, make up an increased proportion of the total cost of each unit of output.c)Because introducing PRP contracts greatly changes individual workers’ relationships to the firm, negotiating the introduction of PRP contracts in complex and time consuming.d)Many firms in the metalworking industry have modernized production equipment in the last five years, and most of these introduced PRP contracts at the same time.e)In firms in the metalworking industry where PRP contracts are in place, the average take-home pay is 15 percent higher than it is in those firms where workers have more traditional contracts.Correct answer is option 'D'. Can you explain this answer?, a detailed solution for Firms adopting “profit-related-pay” (PRP) contracts pay wages at levels that vary with the firm’s profits. In the metalworking industry last year, firms with PRP contracts in place showed productivity per worker on average 13 percent higher than that of their competitors who used more traditional contracts.Q. If, on the basis of the evidence above, it is argued that PRP contracts increase worker productivity, which of the following, if true, would most seriously weaken that argument?a)Results similar to those cited for the metal-working industry have been found in other industries where PRP contracts are used.b)Under PRP contracts costs other than labor costs, such as plant, machinery, and energy, make up an increased proportion of the total cost of each unit of output.c)Because introducing PRP contracts greatly changes individual workers’ relationships to the firm, negotiating the introduction of PRP contracts in complex and time consuming.d)Many firms in the metalworking industry have modernized production equipment in the last five years, and most of these introduced PRP contracts at the same time.e)In firms in the metalworking industry where PRP contracts are in place, the average take-home pay is 15 percent higher than it is in those firms where workers have more traditional contracts.Correct answer is option 'D'. Can you explain this answer? has been provided alongside types of Firms adopting “profit-related-pay” (PRP) contracts pay wages at levels that vary with the firm’s profits. In the metalworking industry last year, firms with PRP contracts in place showed productivity per worker on average 13 percent higher than that of their competitors who used more traditional contracts.Q. If, on the basis of the evidence above, it is argued that PRP contracts increase worker productivity, which of the following, if true, would most seriously weaken that argument?a)Results similar to those cited for the metal-working industry have been found in other industries where PRP contracts are used.b)Under PRP contracts costs other than labor costs, such as plant, machinery, and energy, make up an increased proportion of the total cost of each unit of output.c)Because introducing PRP contracts greatly changes individual workers’ relationships to the firm, negotiating the introduction of PRP contracts in complex and time consuming.d)Many firms in the metalworking industry have modernized production equipment in the last five years, and most of these introduced PRP contracts at the same time.e)In firms in the metalworking industry where PRP contracts are in place, the average take-home pay is 15 percent higher than it is in those firms where workers have more traditional contracts.Correct answer is option 'D'. Can you explain this answer? theory, EduRev gives you an ample number of questions to practice Firms adopting “profit-related-pay” (PRP) contracts pay wages at levels that vary with the firm’s profits. In the metalworking industry last year, firms with PRP contracts in place showed productivity per worker on average 13 percent higher than that of their competitors who used more traditional contracts.Q. If, on the basis of the evidence above, it is argued that PRP contracts increase worker productivity, which of the following, if true, would most seriously weaken that argument?a)Results similar to those cited for the metal-working industry have been found in other industries where PRP contracts are used.b)Under PRP contracts costs other than labor costs, such as plant, machinery, and energy, make up an increased proportion of the total cost of each unit of output.c)Because introducing PRP contracts greatly changes individual workers’ relationships to the firm, negotiating the introduction of PRP contracts in complex and time consuming.d)Many firms in the metalworking industry have modernized production equipment in the last five years, and most of these introduced PRP contracts at the same time.e)In firms in the metalworking industry where PRP contracts are in place, the average take-home pay is 15 percent higher than it is in those firms where workers have more traditional contracts.Correct answer is option 'D'. Can you explain this answer? tests, examples and also practice GMAT tests.
Explore Courses for GMAT exam

Top Courses for GMAT

Explore Courses

Suggested Free Tests

Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
10M+ students study on EduRev
Get App
© EduRev
Education Revolution
Signup to see your scores go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup