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Questions 19-20 are based on the following. Surveys show [#permalink]
28 Jun 2009, 17:20
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Questions 19-20 are based on the following. Surveys show that every year only 10 percent of cigarette smokers switch brands. Yet the manufacturers have been spending an amount equal to 10 percent of their gross receipts on cigarette promotion in magazines. It follows from these figures that inducing cigarette smokers to switch brands did not pay, and that cigarette companies would have been no worse off economically if they had dropped their advertising. 19. Of the following, the best criticism of the conclusion that inducing cigarette smokers to switch brands did not pay is that the conclusion is based on (A) computing advertising costs as a percentage of gross receipts, not of overall costs (B) past patterns of smoking and may not carry over to the future (C) the assumption that each smoker is loyal to a single brand of cigarettes at any one time (D) the assumption that each manufacturer produces only one brand of cigarettes (E) figures for the cigarette industry as a whole and may not hold for a particular company
becoz, its known that 10% of the ppl switch brands and the cig manufacturers spend around 10% of their gross receipts for advertising the cigarettes.
Conclusion is about the whole industry i.e even if it didnt spend that money, they will anyways get the customers and the overall gross receipts will remain same for the industry.
But if we take the case of single company, the company may spend around 10% but get the loayality of all customers ( 10%). i.e the advertising money they spend may be lesss and the money they generate through switched customers may be more.