Please refer to the reasoning marked above.
Hope it is clear.
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When the going gets tough, the tough gets going...

In order to increase profits during a prolonged slowdown in sales, the largest manufacturers of automobiles in the United States have instituted record-setting price increases on all their models. The manufacturers believe that this strategy will succeed, even though it is inconsistent with the normal relationship between price and demand.

Type -assumption
Boil it down - In order to increase profits during sales slowdown , manufacturers have instituted record-setting price increase on all models
-- The net increase in profit because of price increase will be more than loss due to decline in sale caused by price increase

A Automobile manufacturers will, of necessity, raise prices whenever they introduce a new model. - Incorrect - price of all models has been increased
B The smaller automobile manufacturers will continue to take away a large percentage of business from the largest manufacturers.- Incorrect
C The increased profit made on cars sold will more than compensate for any decline in sales caused by the price increases. - Correct -- negate this and the argument falls apart
D New safety restraints that will soon become mandatory for all new cars will not be very costly for manufacturers to install. -- Irrelevant
E Low financing and extended warranties will attract many price-conscious consumers. - Irrelevant


Answer C
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Defender type Assumption. We are not able to pre-phrase or look for any rogue information.
We need to understand the mentality of the author where his/her way of tackling a prolonged decline in sales will eliminate other negatives.

A. Automobile manufacturers will, of necessity, raise prices whenever they introduce a new model.-Out of Scope

B. The smaller automobile manufacturers will continue to take away a large percentage of business from the largest manufacturers-Out of Scope

C. The increased profit made on cars sold will more than compensate for any decline in sales caused by the price increases-
With the price increase and prolonged decline in sales, profit must be made in the process otherwise there is no use of employing this strategy
HOLD ON

D. New safety restraints that will soon become mandatory for all new cars will not be very costly for manufacturers to install.-Out of Scope

E. Low financing and extended warranties will attract many price-conscious consumers.-Out of Scope

ANSWER: C
LEVEL: 600
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