Critical Reasoning
Verbal Ability

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A certain automaker aims to increase its market share by deeply discounting its vehicles' prices for the next several months. The discounts will cut into profits, but because they will be heavily advertised the manufacturer hopes that they will attract buyers away from rival manufacturers' cars. In the longer term, the automaker envisions that customers initially attracted by the discounts may become loyal customers.

In assessing the plan's chances of achieving its aim, it would be most useful to know which of the following?


Whether the automaker's competitors are likely to respond by offering deep discounts on their own products


Whether the advertisements will be created by the manufacturer's current advertising agency


Whether some of the automaker's models will be more deeply discounted than others


Whether the automaker will be able to cut costs sufficientlyto maintain profit margins even when the discounts are in effect


Whether an alternative strategy might enable the automaker to enhance its profitability while holding a constant or diminishing share of the market

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Option(A) is correct

Option A :  Correct. If the answer to this question were yes, the plan would probably not achieve its aim of increasing market share. If the answer were no, the plan would have a good chance of succeeding.

Option B : Since there is no information about the effectiveness of the automaker's current advertising, it would not be useful to know whether the same advertising agency will produce the ads publicizing the discount.

Option C :  Knowing whether some models will be more deeply discounted than others might help in assessing which of the automaker's models will sell best, butitwould not help in assessing the overallchance of the automaker increasing its market share.

Option D : The discounts the automaker plans to offer willcut intoprofits, according to the information given, so the question of whether the automaker can maintain profit margins while the discounts are in effect has already been answered.

Option E :  While it might be useful to the automaker to know about alternative strategies, such knowledge does not help in assessing the likelihood that theplan under discussion will achieve its aim.

The correct answer is A.

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