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# Manufacturers sometimes discount the price of a product to

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Manufacturers sometimes discount the price of a product to [#permalink]

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17 Jul 2006, 22:10
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Official Guide for GMAT Verbal Review, 2nd Edition

Practice Question
Question No.: 68
Page: 143
Difficulty:

Manufacturers sometimes discount the price of a product to retailers for a promotion period when the product is advertised to consumers. Such promotions often result in a dramatic increase in amount of product sold by the manufacturers to retailers. Nevertheless, the manufacturers could often make more profit by not holding the promotions.

Which of the following, if true, most strongly supports the claim above about the manufacturers' profit?

(A) The amount of discount generally offered by manufacturers to retailers is carefully calculated to represent the minimum needed to draw consumers' attention to the product.
(B) For many consumer products the period of advertising discounted prices to consumers is about a week, not sufficiently long for consumers to become used to the sale price.
(C) For products that are not newly introduced, the purpose of such promotions is to keep the products in the minds of consumers and to attract consumers who are currently using competing products.
(D) During such a promotion retailers tend to accumulate in their warehouses inventory bought at discount; they then sell much of it later at their regular price.
(E) If a manufacturer falls to offer such promotions but its competitor offers them, that competitor will tend to attract consumers away from the manufacturer's product.

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[Reveal] Spoiler: OA

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Re: Manufacturers sometimes discount the price of a product to [#permalink]

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17 Jul 2006, 22:23
(D) During such a promotion retailers tend to accumulate in their warehouses inventory bought at discount; they then sell much of it later at their regular price.

If the retailers do not pass on the discount to their customers, then there is no reason for the manufacturers to reduce profit margins and offer the retailers discount. They are better off making higher profits by not offering discounts.
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Re: Manufacturers sometimes discount the price of a product to [#permalink]

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17 Jul 2006, 22:41
Clear winner D.

With D is true, then the bulk of the profits would go to the retailers instead of the manufacturers.
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Re: Manufacturers sometimes discount the price of a product to [#permalink]

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18 Jul 2006, 10:41
recognize the OG question it is D
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Re: Manufacturers sometimes discount the price of a product to [#permalink]

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18 May 2008, 12:34
Manufacturers sometimes discount the price of a product to retailers for a promotion period when the product is advertised to consumers. Such promotion often result in a dramatic increase in amount of product sold by the manufacturers to retailers. Nevertheless, the manufacturers could often make more profit by not holding the promotions.

Which of the following, if true, most strongly supports the claim above about the manufacturers’ profit?

(A) The amount of discount generally offered by manufacturers to retailers is carefully calculated to represent the minimum needed to draw consumers’ attention to the product.

(B) For many consumer products the period of advertising discounted prices to consumers is about a week, not sufficiently long for consumers to become used to the sale price.

(C) For products that are not newly introduced, the purpose of such promotions is to keep the products in the minds of consumers and to attract consumers who are currently using competing products.

(D) During such a promotion retailers tend to accumulate in their warehouses inventory bought at discount; they then sell much of it later at their regular price.

(E) If a manufacturer fails to offer such promotions but its competitor offers them, that competitor will tend to attract consumers away from the manufacturer’s product.
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Re: Manufacturers sometimes discount the price of a product to [#permalink]

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18 May 2008, 12:45
D

A - unrelated
B - not logical, why do consumers need to get used to the sale price?
C - unrelated, sales can be of established products too
C - out of scope, does not address the question.
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Schools: CBS, Kellogg
Re: Manufacturers sometimes discount the price of a product to [#permalink]

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18 May 2008, 18:35
1
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prasannar wrote:
Manufacturers sometimes discount the price of a product to retailers for a promotion period when the product is advertised to consumers. Such promotion often result in a dramatic increase in amount of product sold by the manufacturers to retailers. Nevertheless, the manufacturers could often make more profit by not holding the promotions.

Which of the following, if true, most strongly supports the claim above about the manufacturers’ profit?

(A) The amount of discount generally offered by manufacturers to retailers is carefully calculated to represent the minimum needed to draw consumers’ attention to the product.

(B) For many consumer products the period of advertising discounted prices to consumers is about a week, not sufficiently long for consumers to become used to the sale price.

(C) For products that are not newly introduced, the purpose of such promotions is to keep the products in the minds of consumers and to attract consumers who are currently using competing products.

(D) During such a promotion retailers tend to accumulate in their warehouses inventory bought at discount; they then sell much of it later at their regular price.

(E) If a manufacturer fails to offer such promotions but its competitor offers them, that competitor will tend to attract consumers away from the manufacturer’s product.

The very interesting in GMAC reasoning is making a confusal to test taker, I think so!

Let see the slighly modification I made on this, and you will see that it is easier than it actually is!

Manufacturers sometimes discount the price of a product to retailers for a promotion period when the product is advertised to consumers. Such promotion often result in a dramatic increase in amount of product sold by the manufacturers to retailers. So, the manufacturers can increase their profit by holding promotions.

Which of the following, if true, most strongly shows that the manufacturers CAN NOT get the goal?

Stop and you see that at the very first sentence, the author appraise how good and best promotion can help increase sales of the manufacturers. But why it does not help increase profits. There must be something problemetic in "promotions"

ATTACK THE PROMOTIONS is slogan!
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Re: Manufacturers sometimes discount the price of a product to [#permalink]

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06 Mar 2011, 12:25
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Manufacturers sometimes discount the price of a product to retailers for a promotion period when the product is advertised to consumers. Nevertheless, the manufacturers could often make more profit by not holding the promotions.

Which of the following, if true, most strongly supports the claim above about the manufacturers' profit?

(A) The amount of discount generally offered by manufacturers to retailers is carefully calculated to represent the minumum needed to draw consumers' attention to the product.
(B) For many consumer products the period of advertising discounted prices to consumers is about a week, not sufficiently long for consumers to become used to the sale
(C) For products that are not newly introduced, the purpose of such promotions is to keep the products in the midst of consumers and to attract consumers who are currently using competing products.
(D) During such a promotion retailers tend to accumulate in their warehouses inventory bought at discount; they then sell much of it later at their regular price.
(E) If a manufacturer fails to offer such promotions but its competitor offers them, that competitors will tend to attract consumers away from the manufacturer's product
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Re: Manufacturers sometimes discount the price of a product to [#permalink]

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06 Mar 2011, 13:00
Baten80 wrote:
Manufacturers sometimes discount the price of a product to retailers for a promotion period when the product is advertised to consumers. Nevertheless, the manufacturers could often make more profit by not holding the promotions.

Which of the following, if true, most strongly supports the claim above about the manufacturers' profit?

(A) The amount of discount generally offered by manufacturers to retailers is carefully calculated to represent the minumum needed to draw consumers' attention to the product. - Doesnt impact manufacturer's profit when not holding promotions
(B) For many consumer products the period of advertising discounted prices to consumers is about a week, not sufficiently long for consumers to become used to the sale - Consumer awareness about Sale does not impact manufacture profitability in non discount period
(C) For products that are not newly introduced, the purpose of such promotions is to keep the products in the midst of consumers and to attract consumers who are currently using competing products. Again, no relevance to profitability
(D) During such a promotion retailers tend to accumulate in their warehouses inventory bought at discount; they then sell much of it later at their regular price. If retailers buy more product then needed during this period, then it means lower profit for manufacturer during regular season and hence not offering such discounts can actually increase manufacturer profit, so correct
(E) If a manufacturer fails to offer such promotions but its competitor offers them, that competitors will tend to attract consumers away from the manufacturer's product -has no bearing on profitability

Answer should be D. Whats the OA and OE?
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Re: Manufacturers sometimes discount the price of a product to [#permalink]

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06 Mar 2011, 13:08
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beyondgmatscore wrote:
Baten80 wrote:
Manufacturers sometimes discount the price of a product to retailers for a promotion period when the product is advertised to consumers. Nevertheless, the manufacturers could often make more profit by not holding the promotions.

Which of the following, if true, most strongly supports the claim above about the manufacturers' profit?

(A) The amount of discount generally offered by manufacturers to retailers is carefully calculated to represent the minumum needed to draw consumers' attention to the product. - Doesnt impact manufacturer's profit when not holding promotions
(B) For many consumer products the period of advertising discounted prices to consumers is about a week, not sufficiently long for consumers to become used to the sale - Consumer awareness about Sale does not impact manufacture profitability in non discount period
(C) For products that are not newly introduced, the purpose of such promotions is to keep the products in the midst of consumers and to attract consumers who are currently using competing products. Again, no relevance to profitability
(D) During such a promotion retailers tend to accumulate in their warehouses inventory bought at discount; they then sell much of it later at their regular price. If retailers buy more product then needed during this period, then it means lower profit for manufacturer during regular season and hence not offering such discounts can actually increase manufacturer profit, so correct
(E) If a manufacturer fails to offer such promotions but its competitor offers them, that competitors will tend to attract consumers away from the manufacturer's product -has no bearing on profitability

Answer should be D. Whats the OA and OE?

You are correct but,
Will not retailers pay to manufacturers for their purchase from manufacturer? If retailers buy more then manufacturer will get more money either retailer sell or store. What is my wrong.
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Re: Manufacturers sometimes discount the price of a product to [#permalink]

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06 Mar 2011, 13:44
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Baten80 wrote:
beyondgmatscore wrote:
Baten80 wrote:
Manufacturers sometimes discount the price of a product to retailers for a promotion period when the product is advertised to consumers. Nevertheless, the manufacturers could often make more profit by not holding the promotions.

Which of the following, if true, most strongly supports the claim above about the manufacturers' profit?

(A) The amount of discount generally offered by manufacturers to retailers is carefully calculated to represent the minumum needed to draw consumers' attention to the product. - Doesnt impact manufacturer's profit when not holding promotions
(B) For many consumer products the period of advertising discounted prices to consumers is about a week, not sufficiently long for consumers to become used to the sale - Consumer awareness about Sale does not impact manufacture profitability in non discount period
(C) For products that are not newly introduced, the purpose of such promotions is to keep the products in the midst of consumers and to attract consumers who are currently using competing products. Again, no relevance to profitability
(D) During such a promotion retailers tend to accumulate in their warehouses inventory bought at discount; they then sell much of it later at their regular price. If retailers buy more product then needed during this period, then it means lower profit for manufacturer during regular season and hence not offering such discounts can actually increase manufacturer profit, so correct
(E) If a manufacturer fails to offer such promotions but its competitor offers them, that competitors will tend to attract consumers away from the manufacturer's product -has no bearing on profitability

Answer should be D. Whats the OA and OE?

You are correct but,
Will not retailers pay to manufacturers for their purchase from manufacturer? If retailers buy more then manufacturer will get more money either retailer sell or store. What is my wrong.

Retailers will pay to manufacturers but they will pay a discounted price which has a direct bearing on the profit made by the manufacturer.

Try and understand it numerically - lets say 100 units of the product are sold every year in total including during the discount period with say 10 units coming during discounted period and 90 during full price season. What option C is saying is that retailers would probably buy much greater number of units than 10 (say 50) at discounted price from manufacturer and then sell the excess at at marked price without any discount. Thus, promotions has resulted in reduced profit for manufacturer. On the other hand, if there were no promotions, manufacturer would have sold at least 90 units at full price.

Does it make sense?
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Re: Manufacturers sometimes discount the price of a product to [#permalink]

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Updated on: 06 Mar 2011, 18:21
I think beyondgmatscore did a good job explaining this question .
Anyways here is my take on this ::
Manuf Guy ( MG) , retailer guy ( RG)
MG----->RG---->PEOPLE !

this is how this chain works
We are concerned about MG's profits
so if MG offers a discount to increase it's consumer base ( during promotion period) , and RG acts as a middlemen and keeps the stuff for himself and later sells it at a higher price so he is essentially helping himself( the amount of money earned by RG is equal to the discount btw !) , so if MG would not have kept this PROMOTION PERIOD deal things he would have not lost on anything , rather thn saved on the discount that RG ripped from him so in conclusion RG is a kewl guy and MG is a sucker :p
Good problem btw ..
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Originally posted by akshathbs on 06 Mar 2011, 16:09.
Last edited by akshathbs on 06 Mar 2011, 18:21, edited 1 time in total.
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Re: Manufacturers sometimes discount the price of a product to [#permalink]

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06 Mar 2011, 21:28
Answer is D, it supposrts most strongly. Retailers are the one who benefit, neither manufacturers, nor customers.
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Re: Manufacturers sometimes discount the price of a product to [#permalink]

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08 Mar 2011, 12:28
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Re: Manufacturers sometimes discount the price of a product to [#permalink]

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18 Sep 2011, 21:55
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sondenso wrote:
prasannar wrote:
Manufacturers sometimes discount the price of a product to retailers for a promotion period when the product is advertised to consumers. Such promotion often result in a dramatic increase in amount of product sold by the manufacturers to retailers. Nevertheless, the manufacturers could often make more profit by not holding the promotions.

Which of the following, if true, most strongly supports the claim above about the manufacturers’ profit?

(A) The amount of discount generally offered by manufacturers to retailers is carefully calculated to represent the minimum needed to draw consumers’ attention to the product.

(B) For many consumer products the period of advertising discounted prices to consumers is about a week, not sufficiently long for consumers to become used to the sale price.

(C) For products that are not newly introduced, the purpose of such promotions is to keep the products in the minds of consumers and to attract consumers who are currently using competing products.

(D) During such a promotion retailers tend to accumulate in their warehouses inventory bought at discount; they then sell much of it later at their regular price.

(E) If a manufacturer fails to offer such promotions but its competitor offers them, that competitor will tend to attract consumers away from the manufacturer’s product.

The very interesting in GMAC reasoning is making a confusal to test taker, I think so!

Let see the slighly modification I made on this, and you will see that it is easier than it actually is!

Manufacturers sometimes discount the price of a product to retailers for a promotion period when the product is advertised to consumers. Such promotion often result in a dramatic increase in amount of product sold by the manufacturers to retailers. So, the manufacturers can increase their profit by holding promotions.

Which of the following, if true, most strongly shows that the manufacturers CAN NOT get the goal?

Stop and you see that at the very first sentence, the author appraise how good and best promotion can help increase sales of the manufacturers. But why it does not help increase profits. There must be something problemetic in "promotions"

ATTACK THE PROMOTIONS is slogan!

Can you please explain me the question?
thanks to help.....
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Re: Manufacturers sometimes discount the price of a product to [#permalink]

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19 Sep 2011, 03:16
+1 for D. Tok me 4 minutes. Whooo....

Manufacturer----> Retailer>>>> discount. When:

conclusion: Manufacturer should not sell at discount. Manufacturer looses money. WHy???

Advertising & promotion (together) --- Gud price & availability to consumer. BUt if the retailer stores the goods & does not sells it the purpose of manufacturer is beaten. I know this is not full proof but this is what i thought.

Can somebody shed some more light on this???
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Re: Manufacturers sometimes discount the price of a product to [#permalink]

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21 Sep 2011, 01:08
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In questions where we have to evaluate a decision, I normally establish a relationship and then try to see which option has the most positive or negative impact on the relationship.
In this particular question, for example, the relationship is between the promotions and the profit earned. And the relationship is that the organization will earn more profit if promotions are not held. Lets ask the question: Why would it happen? There could be couple of reasons for that:

1. The customers are indifferent towards promotions and the sales of products is not increasing at all.
2. The discounted prices are not reaching customers at all. So customers are actually not aware of the promotions and they are buying the product at regular price. So if thats the case the company should not offer discounts.

Now lets evaluate options based on our understanding:

prasannar wrote:
Manufacturers sometimes discount the price of a product to retailers for a promotion period when the product is advertised to consumers. Such promotion often result in a dramatic increase in amount of product sold by the manufacturers to retailers. Nevertheless, the manufacturers could often make more profit by not holding the promotions.

Which of the following, if true, most strongly supports the claim above about the manufacturers’ profit?

(A) The amount of discount generally offered by manufacturers to retailers is carefully calculated to represent the minimum needed to draw consumers’ attention to the product. - This statement is actually weakening the claim. INCORRECT

(B) For many consumer products the period of advertising discounted prices to consumers is about a week, not sufficiently long for consumers to become used to the sale price. - This statement talks nothing about the relationship between profit and discounted prices. INCORRECT

(C) For products that are not newly introduced, the purpose of such promotions is to keep the products in the minds of consumers and to attract consumers who are currently using competing products. -Again very vague statement and can not come to clear conclusions with this statement. Lets think like this, if this statement were true, will the organization earn more profit by not offering discount. The answer is NO. Infact on second thoughts, this statement weakens the conclusion. INCORRECT

(D) During such a promotion retailers tend to accumulate in their warehouses inventory bought at discount; they then sell much of it later at their regular price. - This one makes sense and is aligned with our previous thoughts. See thats the benefit of paraphrasing CORRECT

(E) If a manufacturer fails to offer such promotions but its competitor offers them, that competitor will tend to attract consumers away from the manufacturer’s product.- So what?? Out of scope. INCORRECT

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Re: Manufacturers sometimes discount the price of a product to [#permalink]

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14 Apr 2012, 00:06
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akshathbs wrote:
I think beyondgmatscore did a good job explaining this question .
Anyways here is my take on this ::
Manuf Guy ( MG) , retailer guy ( RG)
MG----->RG---->PEOPLE !

this is how this chain works
We are concerned about MG's profits
so if MG offers a discount to increase it's consumer base ( during promotion period) , and RG acts as a middlemen and keeps the stuff for himself and later sells it at a higher price so he is essentially helping himself( the amount of money earned by RG is equal to the discount btw !) , so if MG would not have kept this PROMOTION PERIOD deal things he would have not lost on anything , rather thn saved on the discount that RG ripped from him so in conclusion RG is a kewl guy and MG is a sucker :p
Good problem btw ..

I agree with the OA and understand why OA is correct but I have some concern on how to interpret the question:

We must have the model of Manufacturer --> Retailer --> People in order to support this argument. We need this, otherwise the OA is not correct. If the manufacturers both sell the product DIRECTLY to the consumers (which some manufacturers do in real world, i.e. Coca Cola) and through retailers (i.e supermarket), then the promotion can actually increase their profits despite the fact that the retailers buy as many products as possible during the promotion period and then sell them at retail price as stated in D. In that case, since we don't know any information related to the price and number of units sold in comparison of with-promotion with without-promotion, we can't conclude anything about the profit.

Now, even though one knows the model MG --> RG --> People, meaning that the profit of the MG comes only from the RG, one can't still conclude that the MG makes less money with-promotion compared to without-promotion for the very same reason: we don't know any information about the number of products sold with-promotion and without-promotion. What if when without-promotion the RG buys significantly less product than they do with-promotion? So the MG can still make more money, hence profit, if the number of products sold in the 2 situations greatly differs.

Another question: I'm not a business guy, who do I supposed to know this model MG --> RG --> People?

Anyone can shed some light please? Thanks a lot!
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Re: Manufacturers sometimes discount the price of a product to [#permalink]

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14 Apr 2012, 02:38

If we paraphase the arguments we clearly see D as right
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Re: Manufacturers sometimes discount the price of a product to [#permalink]

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28 Jun 2012, 19:35
Manufacturers sometimes discount the price of a product to retailers for a promotion period when the product is advertised to consumers. Such promotions often results in a dramatic increase in amount of product sold by the manufacturers to retailers. Nevertheless, the manufacturers could often make more profit by not holding the promotion.

Which of the following, if true, most strongly supports the claim above about the manufacturer's profit?

A. The amount of discount generally offered by manufacturers to retailers is carefully calculated to represent the minimum needed to draw consumer's attention to the product.
B. For many consumer products the period of advertising discounted prices to consumers is about a week, not sufficiently long for consumers to become used to the sale price.
C. For products that are not newly introduced, the purpose of such promotions is to keep the product in the minds of consumers and to attract consumers who are currently using competing products.
D. During such a promotion retailers tend to accumulate in their warehouses inventory bought at discount; they then sell much of it later at their regular price.
E. If a manufacturer fails to offer such promotions but its competitor offers them, that competitor will tend to attract consumers away from the manufacturer's product.
Re: Manufacturers sometimes discount the price of a product to   [#permalink] 28 Jun 2012, 19:35

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