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Economic recession

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Economic recession

by GmatKiss » Sat Aug 27, 2011 6:55 pm
In an attempt to abate the pernicious decline in MicroChip's revenue brought about by shrinking demand that is accompanying an economic recession, MicroChip is offering customers a 50% discount for the next three months on all purchases fully paid for within 15 days.

Which of the following assumptions most underlies the chip maker's offer of a discount?

A) MicroChip expects this discount to help the company retain existing customers and gain new ones, enabling the firm to survive in the long-term.
B) There are no other competing chip companies with prices lower than the reduced price.
C) The government will provide massive technology tax credits to businesses, spurring them to purchase chips and other related products.
D) The government will not pursue MircoChip if in fact its behavior in offering a deep discount amounts to a violation of predatory pricing laws.
E) The decrease in revenue brought about by the reduction in price will be smaller than the anticipated increase in revenue brought about by the increase in demand (spurred by the reduction in price).

OA after discussion
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by badpoem » Sat Aug 27, 2011 8:49 pm
In an attempt to abate the pernicious decline in MicroChip's revenue brought about by shrinking demand that is accompanying an economic recession, MicroChip is offering customers a 50% discount for the next three months on all purchases fully paid for within 15 days.

Which of the following assumptions most underlies the chip maker's offer of a discount?

A) MicroChip expects this discount to help the company retain existing customers and gain new ones, enabling the firm to survive in the long-term --> could be an assumption. On second thoughts, long term survival is not the question here.

B) There are no other competing chip companies with prices lower than the reduced price --> out of scope. we are concerned about Microchip.

C) The government will provide massive technology tax credits to businesses, spurring them to purchase chips and other related products. --> out of scope. We need to fill in the gap between the premises. This does not.

D) The government will not pursue MircoChip if in fact its behavior in offering a deep discount amounts to a violation of predatory pricing laws --> out of scope again.

E) The decrease in revenue brought about by the reduction in price will be smaller than the anticipated increase in revenue brought about by the increase in demand (spurred by the reduction in price). --> In other words, the revenue from total sales will be more in spite of the reduction in prices. --> This is the assumption as it deals directly with the revenue generation of Microchip.

Negate E --> The decrease in revenue brought about by the reduction in price will NOT be smaller than the anticipated increase in revenue brought about by the increase in demand (spurred by the reduction in price). --> goes against the conclusion.

Ans, IMO is (E). What is the OA?
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by crick » Sat Aug 27, 2011 9:49 pm
E is the winner here.

The argument assumes Decrease in revenue due to discount < Increase in revenue due to more demand. E says exactly that.

Crick
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by killer1387 » Sun Aug 28, 2011 3:06 am
main issue is with the revenue leading to discount and all.
Only E concerns hence the answer.OA??
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by mankey » Sat Mar 10, 2012 8:26 am
IMO: E. What is the OA?

Regards.
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by [email protected] » Sun Mar 11, 2012 12:48 am
In an attempt to abate the pernicious decline in MicroChip's revenue brought about by shrinking demand that is accompanying an economic recession, MicroChip is offering customers a 50% discount for the next three months on all purchases fully paid for within 15 days.

Which of the following assumptions most underlies the chip maker's offer of a discount?

A) MicroChip expects this discount to help the company retain existing customers and gain new ones, enabling the firm to survive in the long-term.
B) There are no other competing chip companies with prices lower than the reduced price.
C) The government will provide massive technology tax credits to businesses, spurring them to purchase chips and other related products.
D) The government will not pursue MircoChip if in fact its behavior in offering a deep discount amounts to a violation of predatory pricing laws.
E) The decrease in revenue brought about by the reduction in price will be smaller than the anticipated increase in revenue brought about by the increase in demand (spurred by the reduction in price).


IMO E as well. the best answer to take such a decision.... what is the OA...
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