1000CR - T4/19-20

sankruth · Posted: Mon Dec 10, 2007 7:53 am Post subject: 1000CR - T4/19-20

Please provide detailed explanations for your answer choices. OA after a brief discussion...

Surveys show that every year only 10 percent of cigarette smokers switch brands. Yet the manufacturers have been spending an amount equal to 10 percent of their gross receipts on cigarette promotion in magazines. It follows from these figures that inducing cigarette smokers to switch brands did not pay, and that cigarette companies would have been no worse off economically if they had dropped their advertising.

#1 Of the following, the best criticism of the conclusion that inducing cigarette smokers to switch brands did not pay is that the conclusion is based on
(A) computing advertising costs as a percentage of gross receipts, not of overall costs
(B) past patterns of smoking and may not carry over to the future
(C) the assumption that each smoker is loyal to a single brand of cigarettes at any one time
(D) the assumption that each manufacturer produces only one brand of cigarettes
(E) figures for the cigarette industry as a whole and may not hold for a particular company

#2 Which of the following, if true, most seriously weakens the conclusion that cigarette companies could have dropped advertising without suffering economically?
(A) Cigarette advertisements provide a major proportion of total advertising revenue for numerous magazines.
(B) Cigarette promotion serves to attract first-time smokers to replace those people who have stopped smoking.
(C) There exists no research conclusively demonstrating that increases in cigarette advertising are related to increases in smoking.
(D) Advertising is so firmly established as a major business activity of cigarette manufacturers that they would be unlikely to drop it.
(E) Brand loyalty is typically not very strong among those who smoke inexpensive cigarettes.

StarDust845 · Posted: Mon Dec 10, 2007 8:37 am Post subject:

#1 - C or D?
#2- C.

sankruth · Posted: Mon Dec 10, 2007 8:48 am Post subject:

Sorry Stardust, both your answer choices were incorrect (according to OA, which I feel is questionable at times)

But, if you give some explanation on how you arrived at your choices perhaps we can debate on whether you are correct.

StarDust845 · Posted: Mon Dec 10, 2007 9:32 am Post subject:

Ok,

let me take a stab at Q2.

A) Cigarette advertisements provide a major proportion of total advertising revenue for numerous magazines.
(B) Cigarette promotion serves to attract first-time smokers to replace those people who have stopped smoking.
(C) There exists no research conclusively demonstrating that increases in cigarette advertising are related to increases in smoking.
(D) Advertising is so firmly established as a major business activity of cigarette manufacturers that they would be unlikely to drop it.
(E) Brand loyalty is typically not very strong among those who smoke inexpensive cigarettes.

We can rule out A, D and E. They are out of scope for the argument in question (And if I am wrong here, then God help me). That leaves us with B and C.

C: This is probably not the right answer as I first thought. "There exists no research conclusively demonstrating that increases in cigarette advertising are related to increases in smoking." - So what? He is talking about increase in smoking in general (not switching of the brands as I thought earlier). so if cigarette smoking increases or decreases is not a concern of the current argument. only brand SWITCHING is of concern.

B) Cigarette promotion serves to attract first-time smokers to replace those people who have stopped smoking. - seems like a more pluasible answer. Because if it is true that some people do stop smoking then it is of concern to the cigarrette companies that they attract first time smokers to their brands. Hence B seems plausible.

What says you?

Calista. (I will work on the first question after some time..)

sankruth · Posted: Mon Dec 10, 2007 11:34 am Post subject:

Yes, B is the correct answer. for #2.

My answer for Q1 is D (which according to the OA is wrong).
Anyway, here is my reasoning for D... If a manufacturer produces more than one brand then it is possible that when a somoker changes their brand they change to another its own brand. This justifies the company to spend a portion of its revenues on advertising if it can ensure that at least some of its customers when changing brands take up other brands produced by the same company.

However the OA seems to be different. So, please let me know if you can find any other choice that in your opinion is a better fit than D. By the way, C too is wrong.

StarDust845 · Posted: Mon Dec 10, 2007 12:15 pm Post subject:

For Q1 D might not be the right answer. Consluions isn't based on D. what if manufactures produce different brand of cigarettes? Then also they would like people to switch to their brands.. so D doesn't stand.

(A) computing advertising costs as a percentage of gross receipts, not of overall costs
(B) past patterns of smoking and may not carry over to the future
(C) the assumption that each smoker is loyal to a single brand of cigarettes at any one time
(D) the assumption that each manufacturer produces only one brand of cigarettes
(E) figures for the cigarette industry as a whole and may not hold for a particular company

A is simply out of scope.
B is possible answer.
C and D have the same reasoning.. ( I know I am biased against C now, because I know C isn't the answer).
E is simply out of scope.

So B must be the answer. If past patterns do carry over then it doesn't pay to spend on ads.. isnt it. No matter what the manufacturer does.. if people stick to their brands..then it doesn't matter. Teh conclusion is based on the assumption that "past patterns do carry over".. so a best criticism would be that "past patterns may not carry over". Hope this is right...

Calista.

sankruth · Posted: Mon Dec 10, 2007 12:30 pm Post subject:

Let me put you out of your misery (and perhaps spoil the rest of your day.) The OA for #1 is E. Let me quickly add Im still not convinced that E is correct. Im struggling to justify E! Mad

hemanth28 · Posted: Mon Dec 10, 2007 7:13 pm Post subject:

hi sankruth,

For the question 1,lets speak mathematically.
First lets say a company has 2 brands and n number of people.Overall transition in industry is about 10%...this doesnot mean that 10% of people of each brand is transitioning(assuming this means,the indistry statastics hold same for each company).
Even if 10% are changing the brand,there is no mention that a new brand of the same company would capture the full 100% of those people.So spending 10% of revenue doesnt seem to be a good idea.So D may not be appropriate.

Now what statement (E) says is that each company holds different statastics.
It is possible that 50% of comany X are transitining and may be comany Y wants to tap a major portion .So spending 10% seems to be a good idea,if they are equal turnover comanies.

Thanks,
Hemant Maddineni.

sankruth · Posted: Tue Dec 11, 2007 1:09 am Post subject:

Thanks Hemanth! That makes sense. Smile