Charlie's Chainsaw Company has reason to believe that one of

Question

Charlie's Chainsaw Company has reason to believe that one of its models of saw is defective. A recall of all of the saws would cost more than $5 million, and would probably result in a loss in market share over the next quarter because of bad publicity. Still, a recall is the right economic decision.

Which of the following, if true, most supports the conclusion above?

A. Defective chainsaws can seriously injure or even kill the people who use them.
B. Charlie's chief rival has recalled two of its products withing the past year.
C. Product recalls often result in a perception by customers that a given product is permanently defective, even after the defect has been remedied.
D. The stocks of publicly traded companies that announce product recalls often drop upon the announcement, but they generally return to the pre-announcement level within 12 months.
E. Three years ago a rival company went out of business because of large punitive damages awarded to a plaintiff who had been injured by a defective chainsaw.

kingb · Accepted Answer

Charlie’s Chainsaw Company has reason to believe that one of its models of saw is defective. A recall of all of the saws would cost more than $5 million, and would probably result in a loss in market share over the next quarter because of bad publicity. Still, a recall is the right economic decision.

Which of the following, if true, most supports the conclusion above?

A. Defective chainsaws can seriously injure or even kill the people who use them.
B. Charlie’s chief rival has recalled two of its products within the past year.
C. Product recalls often result in a perception by customers that a given product is permanently defective, even after the defect has been remedied.
D. The stocks of publicly traded companies that announce product recalls often drop upon the announcement, but they generally return to the
 pre-announcement level within 12 months.
E. Three years ago a rival company went out of business because of large punitive damages awarded to a plaintiff who had been injured by a defective chainsaw.

shaselai · Answer

A. It is a fact but doesn't support the econmic position.
B. irrelevant
C. irrelevant
D. MAYBE. it is some what about economics
E. YES. It shows exactly what happens if they DONT make the decision, so therefor their decision is a wise one.

E

bsv180985 · Answer

A is wrong coz conclusion cites that it should be right ECONOMIC decision. A definitely supports but its beyond the scope, its not about economic.

D and E are suit. I mistakenly choose D, as its mentioned about share market in the argument. 
The OA is E.

getgyan · Answer

+1E

Premise - Charlie’s Chainsaw Company has reason to believe that one of its models of saw is defective. A recall of all of the saws would cost more than $5 million, and would probably result in a loss in market share over the next quarter because of bad publicity

Conclusion - a recall is the right economic decision

Any option which supports the conclusion is our answer

D and E are lucrative enough.

D. The stocks of publicly traded companies that announce product recalls often drop upon the announcement, but they generally return to the pre-announcement level within 12 months. (12 months of loss is loss. We do not have anything to compare this 12 month with. Not the best you want to select)
E. Three years ago a rival company went out of business because of large punitive damages awarded to a plaintiff who had been injured by a defective chainsaw (this is our answer, a loss of 5 million $ is better than going out of business)

:-D

mohan514 · Answer

real life scenario made me go immediately with A without considering other options

but its CRUEL GMAT WORLD , where author can be concerned about the profit
and hence the answer E

Jp27 · Answer

good stuff getgyan, very nicely explained was torn between D and E...

Caeser · Answer

IMO E

D is not even a contender here because it is OFS. Reason being, it talks about the share prices of a publicly traded company whereas the argument talks about the market share of the company. Share prices are irrelevant.

Thanks,
S

ShashankDave · Answer

Share market and Market share..nice trap is not closely considered! 
My answer is E.

Acer1986 · Answer

Only Option E is strong enough since Option D mentions the cases of publicly traded companies and there is nothing mentioned in the question stem regarding Charlie's Chainsaw Company being a publicly traded company.

warriorguy · Answer

even though recall has some disadvantages, it now seems as to a better idea. Why? Because if they don't recall, then something worse will happen.

E points out that clearly - there is a probability that the company may go out of business. That could be the worst-case scenario.

Among all the options, E gives a strong reason to support the conclusion.

D is using a subset - publicly traded companies. We don't know if CS falls in that category.

David H · Answer

This one had some annoyingly tricky answer choices.

A. The stimulus stated specifically that it had to be the best economic reason, not reasoning based in ethics or otherwise. While that may pull in some serious repercussions in real life, it doesn't matter because it's out of the scope of the question.
B. One would be inclined to think the damage of 2 recalled products must be worse than the damage caused by the recall of 1 product but there is nothing that indicates whether or not this is true.
C. This would weaken the conclusion. If the recall of a product makes customers think that the problems are irreparable, that would be a bad economic decision.
D. It is possible that the company doesn't at all make an announcement and continues to make money in that one year. The potential gains from keeping quiet could potentially outweigh the gains from announcing, so there's nothing that really indicates whether this is a good or bad economic decision.
E. This one seems most demanding of action. Where stocks can go up or down, having a company driven into the ground and going out of business is a different matter entirely. Of the provided reasons this is the one that most strongly supports the given conclusions.

VerbalBot · Answer

Automated notice from GMAT Club VerbalBot:

A member just gave Kudos to this thread, showing it’s still useful. I’ve bumped it to the top so more people can benefit. Feel free to add your own questions or solutions.

This post was generated automatically.

Charlie's Chainsaw Company has reason to believe that one of

Prep Toolkit

Top 5 GMAT Debrief Videos

615 to 715 in 15 Days (Ria's Strategies)

More than Quant/Verbal Abilities: Speed vs. Accuracy

745 with Only Self-Prep and GMAT Club

From 555 to 765: 210-point Improvement

Perfect 805 Score Debrief by Julia

My Rewards

GMAT Critical Reasoning (CR) Questions

Charlie's Chainsaw Company has reason to believe that one of

Prep Toolkit

615 to 715 in 15 Days (Ria's Strategies)

More than Quant/Verbal Abilities: Speed vs. Accuracy

745 with Only Self-Prep and GMAT Club

From 555 to 765: 210-point Improvement

Perfect 805 Score Debrief by Julia

My Rewards