Car dealerships in the state of Fairview have prospered over the term

Question

Car dealerships in the state of Fairview have prospered over the term of the current governor: sales are up by 10 percent relative to four years ago. Nevertheless, car manufacturers have found that the proportion of credit they have extended to dealerships that was paid off on time, despite rising over the first two years of this period, has fallen sharply in the latter two years of the governor's term.

Which of the following, if true, most helps to explain the change between the first two and the second two years of the governor's term in the proportion of credit paid off on time?

A. There are essentially constant sources of demand for cars, such as local and state police departments, and sales to these sources have neither increased nor declined especially during the latter two years of the term.

B. Between the first two and the second two years of the term, dealerships in Fairview saw some or many of their costs, such as real estate and marketing, decrease.

C. New, less successful, dealerships have recently opened business in an attempt to profit from the health of car sales.

D. Dealerships in Fairview have made strategic business decisions in the second two years of the governor's term that are likely to hurt business outcomes.

E. The total amount of credit extended to dealerships by manufacturers decreased between the first two years of the governor's term and the second two years.

ArtVandaley · Answer

E proportion increased because number was less.

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ahabib · Answer

Which of the following, if true, most helps to explain the change between the first two and the second two years of the governor's term in the proportion of credit paid off on time?

Break it down: Later payments although business doing better

A. There are essentially constant sources of demand for cars, such as local and state police departments, and sales to these sources have neither increased nor declined especially during the latter two years of the term.
 
Doesn't give us a reason why there was a shift. This answer choice's tone is neutral.

B. Between the first two and the second two years of the term, dealerships in Fairview saw some or many of their costs, such as real estate and marketing, decrease.
 
If the liability costs are decereasing, you'd expect the opposite to happen.. This doesn't explain the shift mentioned in the passage.

C. New, less successful, dealerships have recently opened business in an attempt to profit from the health of car sales.
 
Regardless if these new dealers were successful at taking business away, the fact remains that sales were up 10% over 4 years, so the original dealers still performed better compared to 4 years prior.

D. Dealerships in Fairview have made strategic business decisions in the second two years of the governor's term that are likely to hurt business outcomes.
 
Same as (C)

E. The total amount of credit extended to dealerships by manufacturers decreased between the first two years of the governor's term and the second two years.
 
(E) by POE, although I can't quite put together why..

ArtVandaley · Answer

Bunuel  can you double check the OA? I am quite certain that OA should be E

DmitryFarberMPrep · Answer

E doesn't matter at all. A change in the AMOUNT of credit tells us nothing about why the PROPORTION of credit paid off on time has declined. For instance, imagine that all the lines of credit in question were issued 4 or more years ago. Then we'd definitely expect to see that the amount of credit would decrease. As long as any payments at all were made, that would be true. But that wouldn't explain the sudden drop-off in on-time payments. And if we changed the scenario to make some of the lines of credit newer, we still wouldn't know why this change happened.

C, on the other hand, is trying to introduce a new factor that might explain the change. If the overall sales boom has enticed weaker players into the market, perhaps these weaker businesses are having more trouble paying back their debts. There's nothing wrong with some businesses in an industry having poor sales while the OVERALL numbers are up 10%. The answer is vaguer than would be ideal (for instance, when did these businesses open and how long would it take them to get into trouble with debt?), but at least it presents a plausible explanation for the change.

This is another of many copycat questions that isn't as compelling as the original. Check that out here: https://gmatclub.com/forum/in-the-count ... l#p1836530

ArtVandaley · Answer

DmitryFarber

YOu were much helpful. Indeed I was able to do the official question right and understand the logic behind it. Thanks

Bunuel · Answer

Official Explanation

Reading the question: we dig into the argument. This question doesn't have much to do with the governor; just a four-year period. Sales are up over the last four years, but credit paid off was higher for two years and then much lower for two years. We need to explain 1) the drop in credit paid off on time. Above all, the correct explanation will accommodate the fact 2) sales have been up. We can use that simple fact as a basic relevance filter.

Applying the filter: (A) doesn't address explicitly or implicitly the fact that sales are up, so it doesn't pass the filter. Choice (B) is an anti-explanation; if costs went down in the latter two years, it should have been easier to pay off credit. Choice (C) is an explanation. It connects to both 1) and 2). We might have imagined that the body of dealerships was unchanging the whole time, but the argument didn't actually say that. Choice (D) ends up saying nothing because it only hints at a possible future outcome, not something affecting the last two years. (E) at least discusses credit and involves a change between the first two years and the second two years. But most likely extending less credit would lead to getting more of it paid off on time, not less. It's also unclear from (E) whether the credit is due during these periods, because we care not so much about when it's extended as whether it's paid when due during one period and the next. So (E) is out.

The correct answer is (C).

Amlu95 · Answer

Im having trouble understanding this line..

Nevertheless, car manufacturers have found that the proportion of credit they have extended to dealerships that was paid off on time, despite rising over the first two years of this period, has fallen sharply in the latter two years of the governor's term.

Does it actually say, "car dealers" have failed to pay on time ? if this is the case.. C makes clear sense.

BhavyaKannan · Answer

I thought either Options B or D are better answer choices than Option C. How is C the right answer?

CrackverbalGMAT · Answer

Hi Bhavya

We are trying to resolve a kind of paradox here - two points of fact which, on first viewing, appear to contradict each other.

a) Car dealerships in the state of Fairview have prospered over the term of the current governor: sales are up by 10 percent relative to four years ago.
b) ...the proportion of credit they have extended to dealerships that was paid off on time, despite rising over the first two years of this period, has fallen sharply in the latter two years of the governor's term.

Since we must consider all premises presented in the question stimulus to be unquestionably true, both (a) and (b) above  must  be true. But they appear contradictory because:

i) For the first 2 years, business (as measured by sales) did well (presumably) and proportion of credit repaid on time also rose.
ii) For the next 2 years, business (as measured by sales) did well (presumably) but proportion of credit repaid on time fell.

Therefore, we are looking for some development  after  the first 2 years which does  both  of the below:

1) Increases sales
2) Adversely impacts repayment of credit

Let us consider answer options (B) and (D)

B. Between the first two and the second two years of the term, dealerships in Fairview saw some or many of their costs, such as real estate and marketing, decrease.  If costs are   decreasing    then profits would increase, making repayment of credit   easier  . Therefore, one would expect proportion of credit repaid on time to increase, which is not consistent with the question stimulus.

D. Dealerships in Fairview have made strategic business decisions in the second two years of the governor's term that are likely to hurt business outcomes.  The business decisions are expected to hurt business outcomes   in the future  . Therefore this does not explain the dichotomy between the first 2 and last 2 years of the governor's term, both of which are   in the past  .

Now consider (C).

C. New, less successful, dealerships have recently opened business in an attempt to profit from the health of car sales.  This satisfies both (1) and (2) above. New dealerships would increase the amount of sales. Since these new dealerships are less successful, they would be worse at repaying credit on time, which would reduce the overall proportion of credit repaid on time. This is the correct answer.

Hope this helps.

Midhilesh489 · Answer

Anyone please explain meaning of this----->>"proportion of credit they have extended to dealerships that was paid off on time"

arushi118 · Answer

The car manufacturers gave credit to the dealers. The dealers returned this credit to the manufacturers - but the proportion of credit returned on time in the first 2 years was more than the proportion of credit returned on time in the later 2 years.

Midhilesh489

Anyone please explain meaning of this----->>"proportion of credit they have extended to dealerships that was paid off on time"

Car dealerships in the state of Fairview have prospered over the term

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Car dealerships in the state of Fairview have prospered over the term

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