PrepTest 126, Section 2, Question 23
In economics, the term "speculative bubble" refers to(462 more words not shown)
Given Garber's account of the(44 more words not shown)
- Asomeone who, after(27 more words not shown)
- Ban art dealer(28 more words not shown)
- Csomeone who, after(31 more words not shown)
- Da publisher who(20 more words not shown)
- Ean airline that,(26 more words not shown)
Reading the passage
Buying high and selling low sounds like losing money. But Garber's buyer can sell many descendants of the expensive original bulb. One low-priced sale doesn't tell us the return from all those sales.
What we’re looking for
So I want someone who pays a lot for an original asset, then earns money by selling many cheaper products derived from it. The reproduction part matters; a price drop alone won't match.
Working the answers
- A
Less competition for a job doesn't match buying something that can produce other things to sell.
- B
The dealer buys a painting and later sells that same painting for less. Nothing lets the dealer earn from copies. This matches a decline in value but misses Garber's reason the original purchase could still pay off.
- C
The cheaper substitutes do explain why the parts lose value. But the buyer isn't producing and selling those substitutes. More supply is a point of resemblance; earning from the new supply is the missing part.
- DCorrect
The expensive novel corresponds to the original bulb, and the affordable copies correspond to its descendants. Revenue from many copies can justify a large initial payment even though each copy costs far less than the original.
- E
The airline reduces prices on the tickets it hasn't sold. It's selling a fixed set of seats, not buying an original asset and producing descendants from it. E lacks the relationship that makes Garber's investment potentially profitable.
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