Critical Reasoning

The Kapoor Meatworks has a virtual monopoly on expensive, gourmet delicacies. In order to expand their market, they intend to offer a budget line of less costly delicacies. Such a product is virtually unknown, and they realize that its success depends upon a heavy advertising campaign. They have decided to finance the advertising with the profits from their gourmet line.

Which of the following, assuming each is a realistic possibility, would pose the most serious obstacle to the Kapoor Meatworks' project?

(A) The introduction of a budget line of delicacies completely undercuts the sales of the gourmet line.

(B) At the start, the company spends more on advertising than it makes from sales of the budget line delicacies.

(C) When the budget line delicacies grow in popularity, competitors enter the budget delicacies market and Kapoor does not have a monopoly in that market.

(D) Many of the consumers who purchase the budget line are tempted to try the delicacies offered in the gourmet line.

(E) Many of the stores that now carry Kapoor's gourmet line of delicacies are exclusive, and refuse to carry their budget line

IMO A

The stimulus tells us that Kapoor is going to use the gourmet line profits to finance the necessary advertising for the budget line.

A states that the budget line would "undercut" the gourmet line. If this happened, gourmet volume would fall and the profit needed for budget line advertising would disappear.