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Mechanicorp s newest product costs so little to make that it [#permalink]
18 Dec 2011, 05:17
83% (02:12) correct
17% (02:05) wrong based on 70 sessions
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Mechanicorp’s newest product costs so little to make that it appears doubtful the company will be able to sell it without increasing the markup the company usually allows for profit: potential clients would simply not believe that something so inexpensive would really work. Yet Mechanicorp’s reputation is built on fair prices incorporating only modest profit margins. The statements above, if true, most strongly support which of the following? (A) Mechanicorp will encounter difficulties in trying to set a price for its newest product that will promote sales without threatening to compromise the company’s reputation. (B) Mechanicorp achieves large annual profits, despite small profits per unit sold, by means of a high volume of sales. (C) Mechanicorp made a significant computational error in calculating the production costs for its newest product. (D) Mechanicorp’s newest product is intended to perform tasks that can be performed by other devices costing less to manufacture. (E) Mechanicorp’s production processes are designed with the same ingenuity as are the products that the company makes.
+1 for A as the M's client will loose the faith in its extremely cheap product,M cannot increase the price of the product as its reputation is based on fair price fixing of the products.
Based on the question, we should make conclusion from the stimulus's premises. premise 1: Cost of new product is so too little to increase the markup premise 2: potential clients would simply not believe that something so inexpensive would really work premise 3: Mechanicorp’s reputation is built on fair prices incorporating only modest profit margins
we should choose the answer whose words are supported by these premises.