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In order to increase profits during a prolonged slowdown in sales, the

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In order to increase profits during a prolonged slowdown in sales, the  [#permalink]

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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.

The manufacturers' plan to increase profits relies on which of the following assumptions?


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

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

C. The increased profit made on cars sold will more than compensate for any decline in sales caused by the price increases.

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

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

Originally posted by kalra on 09 Nov 2017, 08:41.
Last edited by Bunuel on 22 Jan 2019, 23:13, edited 1 time in total.
Renamed the topic and edited the question.
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Re: In order to increase profits during a prolonged slowdown in sales, the  [#permalink]

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New post 09 Nov 2017, 09:48
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kalra wrote:
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.

The manufacturers' plan to increase profits relies on which of the following assumptions?

A Automobile manufacturers will, of necessity, raise prices whenever they introduce a new model. - Irrelevant
B The smaller automobile manufacturers will continue to take away a large percentage of business from the largest manufacturers. - Does not give proper reason.
C The increased profit made on cars sold will more than compensate for any decline in sales caused by the price increases. - Correct
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.Does not indicate the assumption


Please refer to the reasoning marked above.
Hope it is clear.
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Re: In order to increase profits during a prolonged slowdown in sales, the  [#permalink]

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New post 11 Nov 2017, 10:15
kalra wrote:
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 increaseson all their models. The manufacturers believe thatthis strategy will succeed, even though it is inconsistent with the normal relationship between price and demand.

The manufacturers' plan to increase profits relies on which of the following assumptions?

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


The highlighted part suggests that despite increase in Prince Profit maximisation might happen ( Though it is against the normal Price & Demand relationship)

None but (C) talks about the compensation for decreased sales due to increase in price, hence this is our answer!!!
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Re: In order to increase profits during a prolonged slowdown in sales, the  [#permalink]

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New post 13 Nov 2017, 22:36
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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Re: In order to increase profits during a prolonged slowdown in sales, the  [#permalink]

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New post 22 Jan 2019, 23:09
kalra wrote:
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.

The manufacturers' plan to increase profits relies on which of the following assumptions?

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


Plan -> increase the price of all models to increase profits.

Assumption can be -> It will get a good reception from people.

A Automobile manufacturers will, of necessity, raise prices whenever they introduce a new model.
This doesn't address the conclusion.

B The smaller automobile manufacturers will continue to take away a large percentage of business from the largest manufacturers.
smaller automobile is 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.
Correct answer, Negating this will weaken the argument.
The increased profit made on cars sold will result in further loss, for any decline in sales caused by the price increases.

D New safety restraints that will soon become mandatory for all new cars will not be very costly for manufacturers to install.
Safety restraints, is out of scope

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

Answer C
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Re: In order to increase profits during a prolonged slowdown in sales, the  [#permalink]

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New post 25 Jan 2019, 20:12
kalra wrote:
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.

The manufacturers' plan to increase profits relies on which of the following assumptions?


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

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

C. The increased profit made on cars sold will more than compensate for any decline in sales caused by the price increases.

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

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



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
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Re: In order to increase profits during a prolonged slowdown in sales, the   [#permalink] 25 Jan 2019, 20:12
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