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# Because of steep increases in the average price per box of

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Because of steep increases in the average price per box of [#permalink]

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10 Aug 2012, 05:30
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Because of steep increases in the average price per box of cereal over the last 10 years, overall sales of cereal have recently begun to drop. In an attempt to improve sales, one major cereal manufacturer reduced the wholesale prices of its cereals by 20 percent. Since most other cereal manufacturers have announced that they will follow suit, it is likely that the level of overall sales of cereal will rise significantly.

Which of the following would it be most useful to establish in evaluating the argument?

A. Whether the high marketing expenses of the highly competitive cereal market led to the increase in cereal prices

B. Whether cereal manufacturers use marketing techniques that encourage brand loyalty among consumers

C. Whether the variety of cereals available on the market has significantly increased over the last 10 years

D. Whether the prices that supermarkets charge for these cereals will reflect the lower prices the supermarkets will be paying the manufacturers

E. Whether the sales of certain types of cereal have declined disproportionately over the last 10 years
[Reveal] Spoiler: OA
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Re: Because of steep increases in the average price per box [#permalink]

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10 Aug 2012, 06:20
D. Whether the prices that supermarkets charge for these cereals will reflect the lower prices the supermarkets will be paying the manufacturers

high prices >>> drop in sales

whole sale price dropped

high sale only if it results in lower price to consumer
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Re: Because of steep increases in the average price per box [#permalink]

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10 Aug 2012, 07:47
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D. Whether the prices that supermarkets charge for these cereals will reflect the lower prices the supermarkets will be paying the manufacturers

The manufacturers reduced the price so that the end users(customers) will find it cheap and hence the sale will grow, but if the supermarkets(intermediaries) doesn't sell the cereals at the reduced rate then the plan will fail.
so (D) wins.
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Re: Because of steep increases in the average price per box [#permalink]

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10 Aug 2012, 09:10
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(D). This is a classic logic gap: the argument assumes that wholesale price is linked to sale price. Notice how the GMAT disguises the gap: by using the word "price" twice to make us think these concepts are the same.
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Re: Because of steep increases in the average price per box of [#permalink]

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25 Aug 2012, 23:16
Although d) appears to be the right answer, as per the explanation above, I previously concerned the overall demands of cereal that it may have dropped and unlikely to rebound shortly, since steep increases in average price per box of cereal has an effect over 10 years. The overall sales might take some time to rebound.
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Re: Because of steep increases in the average price per box of [#permalink]

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23 Oct 2013, 13:49
Hello from the GMAT Club VerbalBot!

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Re: Because of steep increases in the average price per box of [#permalink]

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24 Oct 2013, 04:19
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prem2056 wrote:
Because of steep increases in the average price per box of cereal over the last 10 years, overall sales of cereal have recently begun to drop. In an attempt to improve sales, one major cereal manufacturer reduced the wholesale prices of its cereals by 20 percent. Since most other cereal manufacturers have announced that they will follow suit, it is likely that the level of overall sales of cereal will rise significantly.

Which of the following would it be most useful to establish in evaluating the argument?

A. Whether the high marketing expenses of the highly competitive cereal market led to the increase in cereal prices

B. Whether cereal manufacturers use marketing techniques that encourage brand loyalty among consumers

C. Whether the variety of cereals available on the market has significantly increased over the last 10 years

D. Whether the prices that supermarkets charge for these cereals will reflect the lower prices the supermarkets will be paying the manufacturers

E. Whether the sales of certain types of cereal have declined disproportionately over the last 10 years

I approach the evaluate questions by following a simple technique - determine whether the answer choice is going to strenghthen or weaken the conclusion in concrete terms - YES or NO.
If the answer choice is either of the two that is going to help the argument and give us an answer.
Applying the technique above to this question:

Conclusion - Reduction in wholesale prices will have an effect on increase in sales due to more spending by the consumers on cereals.
Some pre thinking steps:
1. What if the consumer does not get the benefit of the wholesale prices and still pays the price as he was paying before.
Answer to this would help us evaluate the argument.
2. What if the consumer does not buy wholesale cereals and only buys from retail - then too the argument would give us our answer.

Applying the technique here:

A. Whether the high marketing expenses of the highly competitive cereal market led to the increase in cereal prices
- no effect

B. Whether cereal manufacturers use marketing techniques that encourage brand loyalty among consumers
- no effect

C. Whether the variety of cereals available on the market has significantly increased over the last 10 years
- no effect

D. Whether the prices that supermarkets charge for these cereals will reflect the lower prices the supermarkets will be paying the manufacturers
- Bingo , if the benefit is not getting passed over to the end user the prices will not reduce

E. Whether the sales of certain types of cereal have declined disproportionately over the last 10 years[/quote]
- no effect
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Re: Because of steep increases in the average price per box [#permalink]

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05 Feb 2014, 14:09
rjacobsMGMAT wrote:
(D). This is a classic logic gap: the argument assumes that wholesale price is linked to sale price. Notice how the GMAT disguises the gap: by using the word "price" twice to make us think these concepts are the same.

Yes Mr. Jacobs, I noticed that but on the other hand, one needs to assume that people by on supermarkets rather than in other distribution channels. I believe this type of assumption is acceptable and by no means is going to far out, but still, one could clarify this much better in the given question

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Re: Because of steep increases in the average price per box of [#permalink]

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10 Mar 2014, 20:11
Option D.
There is a gap in the argument:wholesale prices have declined-->sales will increase.
The intermediaries have been ignored ie the retailers and distributors.
Option D takes that into account.

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Because of steep increases in the average price per box of [#permalink]

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15 Mar 2015, 00:47
thevenus wrote:
in 54 secs

D. Whether the prices that supermarkets charge for these cereals will reflect the lower prices the supermarkets will be paying the manufacturers

The manufacturers reduced the price so that the end users(customers) will find it cheap and hence the sale will grow, but if the supermarkets(intermediaries) doesn't sell the cereals at the reduced rate then the plan will fail.
so (D) wins.

Hi thevenus,

noticed that you began your reasoning with 'in 54 secs' , that's really impressive timings.
how did you reach to such a level of reading and comprehending and then reasoning ?
any tips for newbies?

thanks
lucky
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Re: Because of steep increases in the average price per box of [#permalink]

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26 Jul 2015, 04:39
D: Whether the prices that supermarkets charge for these cereals will reflect the lower prices the supermarkets will be paying the manufacturers
a.YES-strengthen the conclusion
b.NO-weaken the conclusion

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Re: Because of steep increases in the average price per box of [#permalink]

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28 Jul 2015, 07:28
I am stunned no one has selected/discussed 'A'

I think A gives a scenario of increasing prices (which according to the argument should decrease sales)
Whereas D talks only about supermarkets which could just be a subset of all sellers.

How did everyone manage to eliminate A. Can you pls point this out to me?
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Re: Because of steep increases in the average price per box of [#permalink]

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15 Apr 2016, 23:15
Answer choice A gives a probable reason why the prices have increased over a period of 10 years. Nothing about how likely is the plan of the manufacturers to improve sales works out.
The answer choice (question to ask to evaluate) should be something that should question the validity of the conclusion which the manufacturers made i.e., "likely that the level of overall sales of cereal will rise significantly, because of a wholesale price cut of 20%"
Answer choice D is the only one that questions this conclusion.
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Re: Because of steep increases in the average price per box of   [#permalink] 15 Apr 2016, 23:15
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