Board member: We are excited to announce that the Galaxy cell phone has been voted the most reliable for the second year in a row. I would now like to intriduce the new Galaxy II cell phone, which will surely increase revenues for our cellular company. Although our phones are currently the most popular on the market, we have consistently generated more revenue from cell phone accessories, such as chargers, batteries, and headsets, than we have from phone sales. To ensure the continuation and increase in the revenues, despite the introduction of our competitor's low price "universal" accessories, which work with all cell phones, we have added a new "exclusivity" feature to all of our new phones. This will prevent the phone from operating with any non-Galaxy accessories or batteries.
Which of the following if true, most strongly supports the projection that the new Galaxy II phones will lead to an increase in revenues?
A) Two of the major cell phone manufacturers have announced that they will also equip their new phones with an exclusivity feature.
B) One of the main reasons for Galaxy's leading position is that it offers consistently lower prices on cell phones.
C) Annual sales of cell phones have been increasing and are projected to continue to increase over the next five years.
D) The universal accessories found on the market are manufactured by a subsidiary of Universe Cellular, the second largest cell phone manufacturer.
E) The new Galaxy II cell phone offers several exclusive, new features as well as the smallest size and lightest weight of any phone to be introduced this year, at a substantially discounted price.
OA is E)
Does not make much sense to me... as the major revenue is generated by accessories...?
Source is Kaplan
The question is such a poor construction with so many visible errors that on first reading I thought that it must be a question by one of the local second-class test prep companies. I was surprised to know that it is from Kaplan
Even the options are very poorly constructed. However, let's ignore this part for the sake of this discussion.
It is, I think, quite clear that only option C and E can qualify to be the answers.
option C: Annual sales of cell phones have been increasing and are projected to continue to increase over the next five years.
Option E: The new Galaxy II cell phone offers several exclusive, new features as well as the smallest size and lightest weight of any phone to be introduced this year, at a substantially discounted price.
Actually, as I can see that combining the two options would almost ensure that the revenues increase. Just one of these can't ensure revenues to rise. However, our objective is not to find the option which ensure the increase in revenues; our objective is to find one which most strongly leads to increase in revenues.
Thus, we need to find the more important or stronger of these two options. This is actually difficult.
If I say option C is stronger, then one may argue "what if the phone is not good?". Obviously if the phone is poor, it will not lead to increase in revenues. So, for option C to lead to increase in revenues, I'll need to make an assumption about the quality of phone.
If I say option E is stronger, then one may argue "what if the annual sales of cell phone (industry) are falling almost 20% (or 40%) each year". In that case also, it may not lead to increase in revenues. Thus, for option E to lead to increase in revenues, I'll need to make an assumption about industry growth.
So, it's a close call.
I go with option E since I think making an assumption that the industry is not facing falling revenues is more palatable to me than making an assumption about the quality of phone vis-a-vis competitors.
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