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During the late seventies when Japan was rapidly expanding

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During the late seventies when Japan was rapidly expanding [#permalink] New post 13 Oct 2003, 23:56
00:00
A
B
C
D
E

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(N/A)

Question Stats:

60% (01:58) correct 40% (00:47) wrong based on 2 sessions
During the late seventies when Japan was rapidly expanding its share of the American auto market, GM surveyed owners of GM cars and asked them whether they would be more willing to buy a large, powerful car or a small, economical car. Seventy percent of those who responded said that they would prefer a large car. On the basis of this survey, GM decided to continue building large cars. Yet during the '80s, GM lost even more of the market to the Japanese."

Which one of the following, if it were determined to be true, would best explain this discrepancy?

A. Only 10 percent of those who were polled replied.
B. Ford which conducted a similar survey with similar results continued to build large cars and also lost more of their market to the Japanese.
C. The surveyed owners who preferred big cars also preferred big homes.
D. GM determined that it would be more profitable to make big cars.
E. Eighty percent of the owners who wanted big cars and only 40 percent of the owners who wanted small cars replied to the survey
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 [#permalink] New post 14 Oct 2003, 00:11
My answer would be E.

A would be a good answer if not for E.
B is just bleh.....
C bleeeeeeehhhhhhh.....
D bleeeeeeehhhhhhhhh
E shows that the poll result is not accurate...so E is the best answer.

Let us know the offical answer. Thanks
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 [#permalink] New post 14 Oct 2003, 01:48
E leaves more possibility for GM plan to be correct. 0.8*0.7=0.56 so GM had an accurate information about 56% of the market. It seems reasonable for GM to continue producing large cars.

A demonstrates that the GM plan was a an act of wishful thinking.

I vote for A.
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official ans [#permalink] New post 14 Oct 2003, 02:21
The argument generalizes from the survey to the general car-buying population, so the reliability of the projection depends on how representative the sample is. At first glance, choice (A) seems rather good, because 10 percent does not seem large enough. However, political opinion polls are typically based on only .001 percent of the population. More importantly, we don't know what percentage of GM car owners received the survey. Choice (B) simply states that Ford made the same mistake that GM did. Choice (C) is irrelevant. Choice (D), rather than explaining the discrepancy, gives even more reason for GM to continue making large cars. Finally, choice (E) points out that part of the survey did not represent the entire public, so (E) is the answer.
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 [#permalink] New post 15 Oct 2003, 01:26
stolyar wrote:
E leaves more possibility for GM plan to be correct. 0.8*0.7=0.56 so GM had an accurate information about 56% of the market. It seems reasonable for GM to continue producing large cars.

A demonstrates that the GM plan was a an act of wishful thinking.

I vote for A.



Stolyar be careful:

There is nothing wrong with A per se. The percentage size of a sample (so long as it reaches a certain criteria which is beyond the scope of the GMAT) is not so important as whether or not such sample is "representative" of the underlying population. In fact, most statistical surveys and experiments use much much MUCH smaller sample sizes than 10% on a percentage basis and yield remarkable accurate results (high % "confidence levels" in stat terms).

IMO, E is the correct answer because it states that a larger than representative sample of large car affectionados relative to those of small cars answered the survey, thus exagerating the weight of the large car lovers' survey answers.

Here is an example using numbers. Suppose there are 1625000 people in the target population of which 875000 (54%) favor large cars and 700000 (46%), small. Hence, the actual number of those favoring small cars in the actual population is 46% -- demand which should not be ignored. If 80% of the large car people actually vote for large cars and only 40% of the 750000 small car people actually vote for small cars with the remainder not participating, the final tally would be 700000 to 300000 or 70% to 30% leading those who do not know the underlying demographics and participation rates to incorrectly infer that only 30% rather than the much stronger 46% of the population wants smaller cars. This erroneous interpretation might even be aggravated if previous data had smaller cars at a higher than 46% share, which might be interpreted by a careless marketing executive as a declining demand for smaller cars when, in fact, an increasing demand actually exists.

As an aside, this is why self-selecting surveys such as internet polls typically yield data that is prone to ambiguous interpretation leading to conclusions that are often more self-serving or entertaining than meaningful.
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AkamaiBrah
Former Senior Instructor, Manhattan GMAT and VeritasPrep
Vice President, Midtown NYC Investment Bank, Structured Finance IT
MFE, Haas School of Business, UC Berkeley, Class of 2005
MBA, Anderson School of Management, UCLA, Class of 1993

  [#permalink] 15 Oct 2003, 01:26
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