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# For similar cars and drivers, automobile insurance for collision

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Intern
Joined: 07 Nov 2003
Posts: 3
Location: South Korea
For similar cars and drivers, automobile insurance for [#permalink]

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07 Dec 2003, 08:27
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Difficulty:

25% (medium)

Question Stats:

77% (02:11) correct 23% (01:18) wrong based on 122 sessions

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For similar cars and drivers, automobile insurance for collision damage has always cost more in Greatport than in Fairmont. Police studies, however, show that cars owned by Greatport residents are, on average, slightly less likely to be involved in a collision than cars in Fairmont. Clearly, therefore, insurance companies are making a greater profit on collision-damage insurance in Greatport than in Fairmont.
Which of the following is an assumption on which the argument depends?

A. Repairing typical collision damage does not cost more in Greatport than in Fairmont.
B. There are no more motorists in Greatport than in Fairmont.
C. Greatport residents who have been in a collision are more likely to report it to their insurance company than Fairmont residents are.
D. Fairmont and Greatport are the cities with the highest collision-damage insurance rates.
E. The insurance companies were already aware of the difference in the likelihood of collisions before the publication of the police reports.
[Reveal] Spoiler: OA

Last edited by JarvisR on 10 Jul 2015, 22:32, edited 1 time in total.
OA updated
Intern
Joined: 22 Nov 2003
Posts: 41
Location: Serbia
Re: For similar cars and drivers, automobile insurance for [#permalink]

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07 Dec 2003, 09:25
My answer is A.
Only possibility that an insurance company, which has higher taxes in a city where its residents are, on average, slightly less likely to be involved in a collision than residents from other city is making less profit is that mentioned company spends more money on repairing damage. In stimulus , the conclusion is different...so then - A
Manager
Joined: 12 Oct 2003
Posts: 247
Location: USA
Re: For similar cars and drivers, automobile insurance for [#permalink]

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07 Dec 2003, 09:26
I vote for A.

If it were true that in Greatport it costs more to get your car repaired then charging more in insurance would make sense. But because the author assumes that it does not cost more, hence he concludes that ....

I don't think I have explained properly. Official ans?
Manager
Joined: 12 Oct 2003
Posts: 247
Location: USA
Re: For similar cars and drivers, automobile insurance for [#permalink]

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07 Dec 2003, 09:27
Note the time difference between Zeka's and my posting
Intern
Joined: 22 Nov 2003
Posts: 41
Location: Serbia
Re: For similar cars and drivers, automobile insurance for [#permalink]

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07 Dec 2003, 11:17
Intern
Joined: 07 Nov 2003
Posts: 3
Location: South Korea
Re: For similar cars and drivers, automobile insurance for [#permalink]

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07 Dec 2003, 16:24
Answer is "A"

Thanks for the explanation
SVP
Joined: 03 Feb 2003
Posts: 1604
Re: For similar cars and drivers, automobile insurance for [#permalink]

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09 Dec 2003, 03:21
immediately got A; it perfectly coroborates the given conclusion.
Intern
Joined: 13 Apr 2014
Posts: 7
Re: For similar cars and drivers, automobile insurance for [#permalink]

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08 Apr 2016, 05:47
I would go with option A as the correct option.
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Re: For similar cars and drivers, automobile insurance for [#permalink]

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14 Apr 2016, 04:24
I go with A.
Since, The argument states that:
Insurance costs = G > F and # Collisions = F > G.
Therefore author might have assumed that Collision cost are less in G. Since, there is a possibility that, the collisions cost can be higher even if the # of collisions are less. So definitely the answer should be in that terms for the authors conclusion to be true.
Manager
Joined: 05 Nov 2012
Posts: 56
For similar cars and drivers, automobile insurance for collision [#permalink]

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03 Aug 2016, 12:51
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For similar cars and drivers, automobile insurance for collision damage has always cost more in Greatport than in Fairmont. Police studies, however, show that cars owned by Greatport residents are, on average, slightly less likely to be involved in a collision than cars in Fairmont. Clearly, therefore, insurance companies are making a greater profit on collision-damage insurance in Greatport than in Fairmont.

Which of the following is an assumption on which the argument depends?

A. Repairing typical collision damage does not cost more in Greatport than in Fairmont.
B. There are no more motorists in Greatport than in Fairmont.
C. Greatport residents who have been in a collision are more likely to report it to their insurance company than Fairmont residents are.
D. Fairmont and Greatport are the cities with the highest collision-damage insurance rates.
E. The insurance companies were already aware of the difference in the likelihood of collisions before the publication of the police reports.

[Reveal] Spoiler:
Can someone eliminate B and C for me.
Intern
Joined: 10 Apr 2013
Posts: 14
GMAT 1: 620 Q45 V31
GMAT 2: 710 Q47 V40
GPA: 3.5
Re: For similar cars and drivers, automobile insurance for collision [#permalink]

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03 Aug 2016, 13:15
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For insurance company to make a profit they either must have least number of claims or they have to minimize each payout

Now choice B talks about the number of motorists. Doesn't talk about the number of motorist who will claim. Doesn't affect the conclusion about making greater profit even when it is negated.

Option C kind of weakens the
Conclusion. It says more claims are likely to be filed thereby affecting the profit. Negating C doesn't shatter the conclusion.

Option A on the other hand says the payout for damage is going to be less in Greenport. Negate A payout is going to be more hence the profit is going to be lesser.

Please let me know if I might have overlooked anything in my reasoning.

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Re: For similar cars and drivers, automobile insurance for collision [#permalink]

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03 Aug 2016, 13:19
nishatfarhat87 wrote:
For similar cars and drivers,automobile insurance for collision damage has always cost more in Greatport than in Fairmont. Police studies, however, show that cars owned by Greatport residents are, on average, slightly less likely to be involved in a collision than cars in Fairmont. Clearly, therefore, insurance companies are making a greaterprofit on collision-damage insurancein Greatport than in Fairmont.

Which of the following is an assumption on which the argument depends?

A. Repairing typical collision damage does not cost more in Greatport than in Fairmont.
B. There are no more motorists in Greatport than in Fairmont.
C. Greatport residents who have been in a collision are more likely to report it to their insurance company than Fairmont residents are.

Can someone eliminate B and C for me.

Check carefully , the argument talks about Cost-----------> Profit relationship
Quote:
We know, Profit = Revenue ( Cost to Drivers ) - Expenditure of Insurance Companies ( On Collision damage )

The missing premises / part is : Expenditure of Insurance Companies ( On Collision damage )

Options (B) and (C) can be rejected because they can not substantiate the reasoning/claim...

(B) No of motorists in Greatport is not a contributor to Profit

(C) Reporting/Non reporting is not a contributor to Profit....

Try negating options (B) and (C) the conclusion doesn't fall apart, ence answer must be (A)

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Manager
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Posts: 56
Re: For similar cars and drivers, automobile insurance for collision [#permalink]

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05 Aug 2016, 07:09
maha2804 wrote:
For insurance company to make a profit they either must have least number of claims or they have to minimize each payout

Now choice B talks about the number of motorists. Doesn't talk about the number of motorist who will claim. Doesn't affect the conclusion about making greater profit even when it is negated.

Option C kind of weakens the
Conclusion. It says more claims are likely to be filed thereby affecting the profit. Negating C doesn't shatter the conclusion.

Option A on the other hand says the payout for damage is going to be less in Greenport. Negate A payout is going to be more hence the profit is going to be lesser.

Please let me know if I might have overlooked anything in my reasoning.

Sent from my ONE E1003 using GMAT Club Forum mobile app

Hey Maha,

This is how I convinced myself. Leme know if you see any flaws in this logic:

The argument states that Clearly, therefore, insurance companies are making a greater profit on collision-damage insurance in Greatport than in Fairmont.
Profit = Revenue - Claims for each

PT: The claims are not going to be higher in GF.
A. Correct. It ignores the price of the claims. If A is negated it can break the argument. Correct
B. This doesn't talk about the greater profit part because if more motorists are there then there will be more revenue and yet not greater profits.
C. Also on similar lines because despite more claims in GP both can earn same amnt of profit due to more exp repairs in greatport.
X had 100 insured ppl, 60 claimed full insurance because of cost = profit on the 60 is zero. Remaining profits = 40

Y had 90 insured insured ppl, 60 claimed insurance but because the repairs are cheaper they claimed .5 . Remaining profits = 90 - .30 = 60

So, B has no effect on conclusion on being negated. Similarly C is also on similar lines. if u reduce the no. of claims in Y.
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Re: For similar cars and drivers, automobile insurance for [#permalink]

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06 Sep 2016, 07:43
joinraveesh wrote:
For similar cars and drivers, automobile insurance for collision damage has always cost more in Greatport than in Fairmont. Police studies, however, show that cars owned by Greatport residents are, on average, slightly less likely to be involved in a collision than cars in Fairmont. Clearly, therefore, insurance companies are making a greater profit on collision-damage insurance in Greatport than in Fairmont.
Which of the following is an assumption on which the argument depends?

A. Repairing typical collision damage does not cost more in Greatport than in Fairmont.
B. There are no more motorists in Greatport than in Fairmont.
C. Greatport residents who have been in a collision are more likely to report it to their insurance company than Fairmont residents are.
D. Fairmont and Greatport are the cities with the highest collision-damage insurance rates.
E. The insurance companies were already aware of the difference in the likelihood of collisions before the publication of the police reports.

For all those picking C, Reporting to the Insurance Company is different from Claiming the Insurance.
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Re: For similar cars and drivers, automobile insurance for   [#permalink] 06 Sep 2016, 07:43
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# For similar cars and drivers, automobile insurance for collision

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