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15 Aug 2022, 06:29
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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.
B. Selta’s management is led by people who are not very concerned about developing environmentally friendly technologies.
C. The R&D team in Selta has a thorough knowledge in development of diesel engines.
D. Electric vehicles are practically maintenance free, whereas diesel vehicles need periodic maintenance including replacement of costly spare parts.
E. The diesel vehicles can also incorporate the safety features typically available in electrical 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.
B. Selta’s management is led by people who are not very concerned about developing environmentally friendly technologies.
C. The R&D team in Selta has a thorough knowledge in development of diesel engines.
D. Electric vehicles are practically maintenance free, whereas diesel vehicles need periodic maintenance including replacement of costly spare parts.
E. The diesel vehicles can also incorporate the safety features typically available in electrical vehicles.
15 Aug 2022, 06:29
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Official Solution:
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.
B. Selta’s management is led by people who are not very concerned about developing environmentally friendly technologies.
C. The R&D team in Selta has a thorough knowledge in development of diesel engines.
D. Electric vehicles are practically maintenance free, whereas diesel vehicles need periodic maintenance including replacement of costly spare parts.
E. The diesel vehicles can also incorporate the safety features typically available in electrical vehicles.
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.
Answer: D
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.
B. Selta’s management is led by people who are not very concerned about developing environmentally friendly technologies.
C. The R&D team in Selta has a thorough knowledge in development of diesel engines.
D. Electric vehicles are practically maintenance free, whereas diesel vehicles need periodic maintenance including replacement of costly spare parts.
E. The diesel vehicles can also incorporate the safety features typically available in electrical vehicles.
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.
Answer: D
Heix
Joined: 21 Feb 2024
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Posts: 468
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Location: India
Concentration: Finance, Entrepreneurship
Schools: Ross MM "26 NUS Columbia '27
GMAT Focus 1: 485 Q76 V74 DI77 
GPA: 3.4
WE:Accounting (Finance)
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17 Feb 2025, 09:14
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I did not quite understand the solution. can you elaborate why option c is wrong and option d is the best choice
