Understanding the argument -
Because production costs are rising, a local theater company is planning to maximize its profits by reducing by half the number of plays it stages per season. Fact
The quality of performances, their frequency, and the admission price will not change. Take note of it. Fact.
Furthermore, neither the audience nor the sponsors, an important source of theater funding, is expected to be lost if the plan is instituted. Fact
The conclusion is in question - the theater's profits are not likely to increase if the plan is instituted. The plan will fail.
There is another such argument - Pl goes through it for a detailed understanding. Link if you are interested in learning in-depth -
https://gmatclub.com/forum/because-post ... l#p3294144Option Elimination - Assuming you understood well or have gone through the explanation for better understanding.
(A) The majority of theatre goers are concerned about possible loss of production quality. - Quality stays the same as per argument. Distortion.
(B) Most sponsors will continue to donate the same amount of money per production as they have in the past. - This is a deceiving answer for some of us who are used to glancing and not reading every word correctly. Remember, GMAT doesn't even waste a single word. Now, why is it a deception? The part "Most sponsors will continue to donate the same amount of money" is a fact per the passage. What comes after this is not at all discussed in the passage, and new information is critical. "money per production" means, as we know, it depends on the no. of production. Remember that as per the plan, we reduced the no. of productions by 50%, so if the no. of production is reduced by 50%, then P = R-C, our revenues are significantly impacted negatively regarding absolute number and profitability. This will ensure that the plan of improving profitability will fail.
(C) Next year's production costs are expected to be on average 20% higher for each production. - We reduced the production cost by 50%, and now this option says production cost increases by 20%, so we still have a buffer of 30%. This will still be a better scenario for maximizing profitability than the old scenario.
(D) Many theater lovers would continue to attend performances regularly even if the admission fee were increased. - at best, this is a weakener as it ensures revenues are not going down. We need an option wherein the revenues go down.
(E) Performers' and technical personnel's salaries will not change in the near future. - its impact will be the same for old and new situations. Distortion. Please review the other question link for a deeper understanding of this option.