Critical Reasoning

The automaker Amcar has seen its best selling line of cars' sales drop by 25 percent over the last year. During this same time, the value of a share of the car company's stock has risen by 15 percent. It seems contradictory that sales would decrease and the stock would rise.

Which of the following, if true during the last 3 years, most helps to explain why the value of a share of Amcar stock changed in the way that it did?

A. Steel shortages forced Amcar to cut production and close factories.

B. Amcar has outsourced much of its production to lower cost areas.

C. Profits from sales of its sport utility vehicles have increased dramatically in the last six months.

D. Amcar employees formed a union that helped them get higher salaries and increased medical benefits.

E. Several articles in prominent business publications listed Amcar as a company that has poor management.







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[spoiler]Answer: C

Can anyone explain why the choice C is preferable than B? [/spoiler]




Thanks,
Yvonne

Obviously C

Choice B explains a reduction in cost. It does not in any way confirm that company managed to sell more cars.

What we need is a increased profit that would cascase to increased stock value which comes from C.

yvonne0923 wrote:

B. Amcar has outsourced much of its production to lower cost areas.

C. Profits from sales of its sport utility vehicles have increased dramatically in the last six months.

The use of words "increased dramatically" indicates how the profits have jumped because of another source despite the low sales from the popular car.As vineeshp has rightly pointed out that B only tells us about the lower production cost but how much lower than the previous cost,we don't know.The wording is very mild in this option to let us make any strong conclusion.

A. Steel shortages forced Amcar to cut production and close factories. -- [This states that the company closed factories , that doesnt solve the contradiction]

B. Amcar has outsourced much of its production to lower cost areas. -- [It tells the reason that the cost of production is less but we cannot assume that profits are good , also doesnot cite any clue for increase in stock .. how people know about the well being of company ? so it is not sufficient enough]

C. Profits from sales of its sport utility vehicles have increased dramatically in the last six months. -- [This cites that profit in sports section has increased that has added an advantage for the company , as a reult the stocks are up ]

D. Amcar employees formed a union that helped them get higher salaries and increased medical benefits. -- [Irrelevant]

E. Several articles in prominent business publications listed Amcar as a company that has poor management. [This is total opposite , it hampers , OUT]

IMO C.

Instead of Amcar we can just think "Porsche" or "Ferrari" to get the answer.

Porsche is the leading sport car manufacturer...makes cars only for rich guys but still stays in business..

wats the source ?

mundasingh123 wrote:wats the source ?

Veritas Prep.