Over the past five years, the price gap between name-brand : GMAT Critical Reasoning (CR)
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# Over the past five years, the price gap between name-brand

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Over the past five years, the price gap between name-brand [#permalink]

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04 Sep 2006, 20:54
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Over the past five years, the price gap between name-brand cereals and less expensive store-brand cereals has become so wide that consumers have been switching increasingly to store brands despite the name brandsâ€™ reputation for better quality. To attract these consumers back, several manufacturers of name-brand cereals plan to narrow the price gap between their cereals and store brands to less than what it was five years ago.

Which of the following, if true, most seriously calls into question the likelihood that the manufacturersâ€™ plan will succeed in attracting back a large percentage of consumers who have switched to store brands?

A. There is no significant difference among manufacturers of name-brand cereals in the prices they charge for their products.
B. Consumers who have switched to store-brand cereals have generally been satisfied with the quality of those cereals.
C. Many consumers would never think of switching to store-brand cereals because they believe the name brand cereals to be of better quality.
D. Because of lower advertising costs, stores are able to offer their own brands of cereals at significantly lower prices than those charged for name-brand cereals.
E. Total annual sales of cerealsâ€”including both name-brand and store-brand cerealsâ€”have not increased significantly over the past five years.
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04 Sep 2006, 21:05
I think, D is the answer.

The new plan might not work, as the stores are offering branded cereals at low price.
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04 Sep 2006, 21:07
B for me...
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04 Sep 2006, 21:10
sure shot B.
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04 Sep 2006, 21:16
B for me..
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04 Sep 2006, 21:17
If branded cereals are available at almost the same price, don't you think store cereal users shift?
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Last edited by ak_idc on 04 Sep 2006, 21:48, edited 1 time in total.
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04 Sep 2006, 21:37
If consumers are satisfied with the quality of store brand cereals - one can argue that they have no reason to switch even if the price is almost the same as name brand cereals...

ak_idc wrote:
If branded cereals are available at almost the same price, don't you think store cereal uses shift?
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04 Sep 2006, 21:47
Lets say, I have a beatle and I am satisfied with its performance. And with a new offer I am getting Ferrari at almost the same price. Will I shift or not?
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04 Sep 2006, 21:54
ak_idc wrote:
Lets say, I have a beatle and I am satisfied with its performance. And with a new offer I am getting Ferrari at almost the same price. Will I shift or not?

Sure you will but the argument says "they will narrow the price gap between their cereals and store brands to less than what it was five years ago."

Five years ago the price gap between Beatle and Ferrari was 225,000 and now its 200,000. Will you buy it???? On top of that if you are satisfied with the performance of beatle because you use your car just from home to office.

Its a must B.
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04 Sep 2006, 22:06
B.

B is related to the consumer's perception of quality.
D is the next closest, but it has less to do with consumer, but only with price.
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04 Sep 2006, 22:10
Yup B is the OA good work guys
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04 Sep 2006, 22:15
ps_dahiya wrote:
ak_idc wrote:
Lets say, I have a beatle and I am satisfied with its performance. And with a new offer I am getting Ferrari at almost the same price. Will I shift or not?

Sure you will but the argument says "they will narrow the price gap between their cereals and store brands to less than what it was five years ago."

Five years ago the price gap between Beatle and Ferrari was 225,000 and now its 200,000. Will you buy it???? On top of that if you are satisfied with the performance of beatle because you use your car just from home to office.

Its a must B.

thanks...I took narrow as almost equal price..that was wrong.
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05 Sep 2006, 00:04
B for me too.
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05 Sep 2006, 00:07
B for me too.
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05 Sep 2006, 01:27
Yup B here...

D answers the question how the stroes did that, but the argument does not ask about how it happened. They just say that the branded guys wanna narrow it down, they might use the same technique for all we know...
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05 Sep 2006, 18:06
Straight B.
05 Sep 2006, 18:06
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