GMAT Club World Cup 2022 (DAY 7): Selta is a middle sized automobile c

GMAT CLUB Official Explanation:



A. This option shows a disadvantage of electric vehicles from an environmental perspective. However this option has no bearing on the economic aspect. Since it is required to find an economic explanation, this option is irrelevant.

B. This option may provide an explanation why Selta is investing in diesel vehicles rather than electric vehicles, but an economic explanation is required.

C. This option may give an explanation why developing diesel vehicles may be more convenient for Selta to develop than one might otherwise think it to be. However it is already stated in the passage that electrical vehicles are more profitable than diesel vehicles and hence this option does not provide an explanation why even then Selta is investing in diesel vehicles.

D. Correct. This option gives an explanation how diesel vehicles can be more profitable than electric vehicles. Selta might be banking on the profits from the after sales service and sale of spare parts.

E. This option is irrelevant because the question is about an economic explanation and not safety features.
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Premise 1: Selta is a middle sized automobile company, which is currently spending a lot in developing an environment friendly variation of its existing vehicle that runs on diesel.
Premise 2: However, the market now needs electric vehicles, which are more environmentally friendly than diesel vehicles.

Conclusion: Hence the profit margin from selling electric vehicles is much higher than that from selling diesel vehicles.

Asked: Which of the following options, if true, gives an economic explanation for Selta's investments in the less profitable vehicle of the two mentioned in the passage above?


Since electric vehicles are charged by sources that burn diesel to generate electricity, they are not more environmentally friendly than environment friendly variation of diesel vehicle. Therefore, Selta's investments in the less profitable vehicle of the two seems economically justified.
Correct


The statement does not provide economic explanation for Selta's investments in the less profitable vehicle of the two since environmentally friendly vehicles have higher profit margins. It shows management incapability to develop environmentally friendly technologies.
Incorrect


The statement does not provide economic explanation for Selta's investments in the less profitable vehicle of the two since environmentally friendly vehicles have higher profit margins. Even if the R&D team in Selta has a thorough knowledge in development of diesel engines, it should adapt newer higher profitable and environmentally friendly technologies.
Incorrect.


The statement does not provide economic explanation for Selta's investments in the less profitable vehicle of the two since environmentally friendly vehicles have higher profit margins since diesel vehicles are not only less environmentally friendly, but also need more periodic maintenance, making them even less attractive technology to invest in.
Incorrect


The statement does not provide economic explanation for Selta's investments in the less profitable vehicle of the two since environmentally friendly vehicles have higher profit margins since it is concerned with safety features of the vehicles.
Incorrect


IMO A

I personally love resolve the paradox questions. It feels like solving a puzzle, or maybe a mystery. Hmm. Anyway, let's solve this question for now.

What is the paradox?
> Electric cars are more profitable as they have a higher profit margin
> Selta is researching a more environment-friendly version of its diesel car even though it knows that the market needs electric cars

Is Selta stupid? Probably not. So why is it doing this? Maybe it has some way other than initial sales to earn profits? That would explain Selta's plan. Let's head toward the options and analyse.

(A) This directly challenges the premise, which is a big no-no. Hence, incorrect
(B) Well, even if that's true, no management would ignore a higher profit margin. This is incorrect as well
(C) Good for Selta's R&D team. But we don't know anything about their knowledge of electric car engines. Hence, this isn't the option we're looking for
(D) Yes! There's the alternative money-minting plan that I was looking for. Oh you clever clever Selta
(E) Safety features aren't really being talked about here. So this is out of scope and hence incorrect.

Answer is option D

D is the correct answer
A. Electric vehicles are not as environmentally friendly as generally thought, because they are charged by sources that burn diesel to generate electricity. we should focus on economic perspective

B. Selta’s management is led by people who are not very concerned about developing environmentally friendly technologies. irrelevant

C. The R&D team in Selta has a thorough knowledge in development of diesel engines. out of scope

D. Electric vehicles are practically maintenance free, whereas diesel vehicles need periodic maintenance including replacement of costly spare parts. Spot on. Later maintenance will make up the lesser price margin

E. The diesel vehicles can also incorporate the safety features typically available in electrical vehicles. irrelevant

IC : Selta is a middle sized automobile company, which is currently spending a lot in developing an environment friendly variation of its existing vehicle that runs on diesel
Conclusion market now needs electric vehicles, which are more environmentally friendly than diesel vehicles, and hence the profit margin from selling electric vehicles is much higher than that from selling diesel vehicles.

need to find an economic explanation for Selta's investments in the less profitable vehicle of the two mentioned in the passage above

A. Electric vehicles are not as environmentally friendly as generally thought, because they are charged by sources that burn diesel to generate electricity. not relevant

B. Selta’s management is led by people who are not very concerned about developing environmentally friendly technologies.
not relevant
C. The R&D team in Selta has a thorough knowledge in development of diesel engines. not relevant

D. Electric vehicles are practically maintenance free, whereas diesel vehicles need periodic maintenance including replacement of costly spare parts. ; correct if Selta develops an environmental friendly version and if successful then it would be more profitable in the long run as its parts would be replaced at a cost

E. The diesel vehicles can also incorporate the safety features typically available in electrical vehicles.
not relevant

OPTION D is correct

Correct answer : Choice D

The key to answering this question is noticing "economic explanation for Selta's investments" in the question prompt.

A. Electric vehicles are not as environmentally friendly as generally thought, because they are charged by sources that burn diesel to generate electricity. - Wrong : Has nothing to do with economic / monetary aspect.

B. Selta’s management is led by people who are not very concerned about developing environmentally friendly technologies. - Wrong : Has nothing to do with economic / monetary aspect.

C. The R&D team in Selta has a thorough knowledge in development of diesel engines. - Wrong : Has nothing to do with economic / monetary aspect.

D. Electric vehicles are practically maintenance free, whereas diesel vehicles need periodic maintenance including replacement of costly spare parts. - Correct... Ahhhh, this makes sense. Even though , the initial profits might be less compared to electric vehicles, the fact that , these diesel vehicles need more maintenance and replacement of costly parts, on the long run , it makes more sense to invest in them ( the economic explanation)

E. The diesel vehicles can also incorporate the safety features typically available in electrical vehicles. - Wrong : Has nothing to do with economic / monetary aspect.

WHY THE MANAGEMENT going for diesel vehicle instead of electric vehicle- this we have to prove
2 ways to prove that one is that diesel has a advantage of electric vehicle has a disadvantage
in OPtion A shown that electric vehicle has a disadvantage that's why it's the ans
ans A

IMO A

Which of the following options, if true, gives an economic explanation for Selta's investments in the less profitable vehicle of the two mentioned in the passage above?

A. Electric vehicles are not as environmentally friendly as generally thought, because they are charged by sources that burn diesel to generate electricity. - reason for advocating electric car was that they were more environment friendly, BUt as per this option if it is not as eco friendly as thought and uses diesel, it makes sense for Selta to make diesel cars . Provides an additional reason why Selta should invest in diesel car

B. Selta’s management is led by people who are not very concerned about developing environmentally friendly technologies.- irrelevant

C. The R&D team in Selta has a thorough knowledge in development of diesel engines.- irrelevant

D. Electric vehicles are practically maintenance free, whereas diesel vehicles need periodic maintenance including replacement of costly spare parts. - opposite of what we are looking for. This gives reason on why Selta should NOT manufacture diesel cars.

E. The diesel vehicles can also incorporate the safety features typically available in electrical vehicles.-- what are these safety features. Not given in the passage.

We have to answer w.r.t to an economic decision, which means select an option which helps to establish economical benefit to Selta.

A. Electric vehicles are not as environmentally friendly as generally thought, because they are charged by sources that burn diesel to generate electricity.: Out of scope (w.r.t economical value). Reject

B. Selta’s management is led by people who are not very concerned about developing environmentally friendly technologies.: Wrongly stated. Selta's management is indeed concerned about developing environmentally friendly. Also it is Out of scope (w.r.t economical value). Reject

C. The R&D team in Selta has a thorough knowledge in development of diesel engines.: Out of scope (w.r.t economical value). Reject

D. Electric vehicles are practically maintenance free, whereas diesel vehicles need periodic maintenance including replacement of costly spare parts: Correct, as service will also generate some profit to Selta.

E. The diesel vehicles can also incorporate the safety features typically available in electrical vehicles: Out of scope (w.r.t economical value).

Hence D is the correct option.

Confused between A & E

A. Electric vehicles are not as environmentally friendly as generally thought, because they are charged by sources that burn diesel to generate electricity. - this is negating the core argument about the degree to which EVs are environment friendly - strong contender for the correct answer

E. The diesel vehicles can also incorporate the safety features typically available in electrical vehicles. - this is the best choice, since, as per the statement, the company can incorporate the safety benefits of an EV in the diesel variants. My only doubt is if the 'safety' feature could be something other than what we are referring to.

Experts please help.

ANSWER D

Conclusion: the profit margin from selling electric vehicles is much higher than that from selling diesel vehicles

Counter Premise: Selta is spending a lot in developing an environment friendly variation of its existing vehicle that runs on diesel.

Premise: the market now needs electric vehicles, which are more environmentally friendly than diesel vehicles

Gap: Selta is spending a lot on its diesel variant rather than electric vehicles, this must be because there's some other benefit/profit Selta is hoping to make


A. Electric vehicles are not as environmentally friendly as generally thought, because they are charged by sources that burn diesel to generate electricity. This is a close one. Electric vehicles not being environmentally friendly could possibly be a reason why Selta is not investing in those, but still, this does NOT explain about how they intend on making profits from diesel variant.

B. Selta’s management is led by people who are not very concerned about developing environmentally friendly technologies. This doesn't explain why Selta is spending on its diesel variant

C. The R&D team in Selta has a thorough knowledge in development of diesel engines. Just because it has an experienced R&D team, doesn't explain why Selta is spending on its diesel variant

D. Electric vehicles are practically maintenance free, whereas diesel vehicles need periodic maintenance including replacement of costly spare parts. CORRECT, Selta hopes to make profit margin by replacing spare parts

E. The diesel vehicles can also incorporate the safety features typically available in electrical vehicles. Safety features are irrelevant to the conclusion here

We are asked to find an economic explanation for Selta's investments in the less profitable vehicle.

A. Electric vehicles are not as environmentally friendly as generally thought, because they are charged by sources that burn diesel to generate electricity.

Doesn't give any economic advantage. Hence eliminate.

B. Selta’s management is led by people who are not very concerned about developing environmentally friendly technologies.

Doesn't give any economic advantage. Hence eliminate.

C. The R&D team in Selta has a thorough knowledge in development of diesel engines.

While tempting, we dont know if the knowledge that they have can turn out any economic gains for the company. Hence eliminate

D. Electric vehicles are practically maintenance free, whereas diesel vehicles need periodic maintenance including replacement of costly spare parts.

This seems correct. The company plans to gain from repairs

E. The diesel vehicles can also incorporate the safety features typically available in electrical vehicles.

Doesn't give any economic advantage. Hence eliminate.

IMO D
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IMO Option D is the answer.
Option D shows that Selta can still make money when customers come to replace costly spare parts.

Selta is a middle sized automobile company, which is currently spending a lot in developing an environment friendly variation of its existing vehicle that runs on diesel. However, the market now needs electric vehicles, which are more environmentally friendly than diesel vehicles, and hence the profit margin from selling electric vehicles is much higher than that from selling diesel vehicles.

Which of the following options, if true, gives an economic explanation for Selta's investments in the less profitable vehicle of the two mentioned in the passage above?

A. Electric vehicles are not as environmentally friendly as generally thought, because they are charged by sources that burn diesel to generate electricity. : Correct
Electric vehicles are not as environment friendly and they use diesel(less environment friendly, less profitable) double negative compared to diesel vehicle.

B. Selta’s management is led by people who are not very concerned about developing environmentally friendly technologies : Incorrect.
Argument says that they are spending a lot in developing an environment friendly variation of its existing vehicle that runs on diesel.

C. The R&D team in Selta has a thorough knowledge in development of diesel engines.: Incorrect
R&D team's knowledge is not relevant here. It doesn't show electric vehicle are less profitable.

D. Electric vehicles are practically maintenance free, whereas diesel vehicles need periodic maintenance including replacement of costly spare parts.: Incorrect
This is against the required point of why they opted for diesel vehicles which are less profitable.

E. The diesel vehicles can also incorporate the safety features typically available in electrical vehicles.: Incorrect
It doesn't show that electrical vehicle will give less profit.


Ans: A

A. Electric vehicles are not as environmentally friendly as generally thought, because they are charged by sources that burn diesel to generate electricity.
INCORRECT. This statement goes directly against one of the premises of the argument. So this cannot be an economic explanation for Selta's investments in the less profitable vehicle of the two.

B. Selta’s management is led by people who are not very concerned about developing environmentally friendly technologies.
INCORRECT. What Selta’s management is concerned about is not a point in argument. This has no relevance to the argument

C. The R&D team in Selta has a thorough knowledge in development of diesel engines.
INCORRECT. It may be the case that R&D team in Selta has a thorough knowledge in development of diesel engines, but this does not give an economic explanation as to chose diesel cars over electric cars. It could very well be the case that Selta's R&D team also has thorough knowledge in development of electric engines.

D. Electric vehicles are practically maintenance free, whereas diesel vehicles need periodic maintenance including replacement of costly spare parts.
CORRECT. If diesel vehicles needs periodic maintenance including replacement of costly spare parts, then there is a valid explanation why Selta may decide on choosing diesel engines over electric engines. They would enjoy continuous business in the form of returning customers for maintenance of their vehicles, which in case they produced diesel engines will not happen.

E. The diesel vehicles can also incorporate the safety features typically available in electrical vehicles.
INCORRECT. What this statement says is that safety features in diesel engines can match that of electrical vehicles. But does this give Selta an economic reason to choose diesel engine over electric engine ? .. No.

Selta is a middle sized automobile company, which is currently spending a lot in developing an environment friendly variation of its existing vehicle that runs on diesel. However, the market now needs electric vehicles, which are more environmentally friendly than diesel vehicles, and hence the profit margin from selling electric vehicles is much higher than that from selling diesel vehicles.

Which of the following options, if true, gives an economic explanation for Selta's investments in the less profitable vehicle of the two mentioned in the passage above?

A. Electric vehicles are not as environmentally friendly as generally thought, because they are charged by sources that burn diesel to generate electricity.
-This is irrelevant. As here we are looking for economic explanation ,thus the characteristics of electric vehicles do not add any value

B. Selta’s management is led by people who are not very concerned about developing environmentally friendly technologies.
-This is weakener rather than a strengthener. This option is incorrect
C. The R&D team in Selta has a thorough knowledge in development of diesel engines.
This is incorrect. Thorough knowledge does not provide any economic explanation behind the investment on diesel vehicles
D. Electric vehicles are practically maintenance free, whereas diesel vehicles need periodic maintenance including replacement of costly spare parts.
this is the correct option.As periodic maintenance including replacement of costly spare parts will help the company to earn profit
E. The diesel vehicles can also incorporate the safety features typically available in electrical vehicles.
This option is out of scope as we are looking for the economic explanation behind the investment

A. Electric vehicles are not as environmentally friendly as generally thought, because they are charged by sources that burn diesel to generate electricity.
Weakens authors argument. If Electric vehicles are not environment friendly then the profit margin is also low, and hence it makes economic sense to invest in Diesel technology.

B. Selta’s management is led by people who are not very concerned about developing environmentally friendly technologies.
If this statement is true, proves that management's decision is not based of economic interest, hence no economic justification for investment in Diesel Technology.

C. The R&D team in Selta has a thorough knowledge in development of diesel engines.
Does not strengthen or weaken. R&D team could also have knowledge of Electric technology. Since it does not weaken authors argument, electric technology is environment friendly and makes more economic sense.

D. Electric vehicles are practically maintenance free, whereas diesel vehicles need periodic maintenance including replacement of costly spare parts.
This argument somewhat strengthens the argument by providing more information in favour of electric technology.

E. The diesel vehicles can also incorporate the safety features typically available in electrical vehicles.
Does not strengthen or weaken authors argument. Author has not weighed in safety features as one of the reasons for higher profitability of electric vehicles.

Choice A is the correct answer

A. Electric vehicles are not as environmentally friendly as generally thought, because they are charged by sources that burn diesel to generate electricity. - INCORRECT
-While this is a good option, I consider this a trap - the question stem states to give an "economic explanation" for the investment and this option gives an "environment friendly explanation"

B. Selta’s management is led by people who are not very concerned about developing environmentally friendly technologies. INCORRECT
- The concern for environment is not a primary focus for earning more profit. They are neither more profitable nor more environment friendly than electric vehicles

C. The R&D team in Selta has a thorough knowledge in development of diesel engines. - INCORRECT
- Knowledge can be grown/different people can be hired in a team for more profit

D. Electric vehicles are practically maintenance free, whereas diesel vehicles need periodic maintenance including replacement of costly spare parts. - CORRECT
- With the periodic requirement, Selta can charge for maintenance and can ultimately offset the profit difference initially caused by the investment

E. The diesel vehicles can also incorporate the safety features typically available in electrical vehicles. - INCORRECT
- No discussion on "safety" features

Which of the following options, if true, gives an economic explanation for Selta's investments in the less profitable vehicle of the two mentioned in the passage above?
Economic explatnation implies from monetary point of view
that is, if Selta invests money in creating an environment friendly diesel engine which is less profitable initially, but what option can ensure more inflows of revenue after the car is sold i.e in future.

A. Electric vehicles are not as environmentally friendly as generally thought, because they are charged by sources that burn diesel to generate electricity. no economic factor involved. Incorrect

B. Selta’s management is led by people who are not very concerned about developing environmentally friendly technologies.
no economic factor involved. Incorrect
C. The R&D team in Selta has a thorough knowledge in development of diesel engines.
This implies that the R&D team will have high chances of being successful in developing the diesel engine...but again no economic factor involved in ensuring profits to the company. Incorrect
D. Electric vehicles are practically maintenance free, whereas diesel vehicles need periodic maintenance including replacement of costly spare parts. this statement is correct, as periodic maintenance and replacement of costly spare parts will ensure reguar inflow of money to the company

E. The diesel vehicles can also incorporate the safety features typically available in electrical vehicles.
no economic factor involved. Incorrect
Answer D