Critical Reasoning

Because postage rates are rising, Home Decorator magazine plans to maximize its profits by reducing by one-half the number of issues it publishes each year. The quality of articles, the number of articles published per year, and the subscription price will not change. Market research shows that neither subscribers nor advertisers will be lost if the magazine's plan is instituted.

Which of the following if true provides the strongest evidence that the magazine's profits are likely to decline if the plan is instituted.

(A) With the new postage rates, a typical issue under the proposed plan would cost about one-third more to mail than a typical current issue would.

(B) The majority of the magazine's subscribers are less concerend about a possible reduction in the quantity of the magazine's articles than about a possible loss of the current high quality of its articles

(C) Many of the magazine's long time subscribers would continue their subscriptions even if the price were increased

(D) Most of the advertisers that purchase advertising space in the magazine will continue to spend the same amount on advertising per issue as they have in the past.

(E) Production costs for the magazine are expected to remain stable.

Explanations Please

is the answer C?

trangle wrote:is the answer C?

If Your Answer Is correct will u explain How u eliminated each of the other options ?

below is my reasoning

a. this does not talk anything about the proposed plan.
b. out of scope
c. if this is true, the magazine's profit will decline since there will not be enough magazines to sell.
d. out of scope
e. out of scope

trangle wrote:below is my reasoning

a. this does not talk anything about the proposed plan.
b. out of scope
c. if this is true, the magazine's profit will decline since there will not be enough magazines to sell.
d. out of scope
e. out of scope

No Its wronmg. Well U put 60 % of the Coices out of scope ,It would help if you explain why U think the options are irrelevant.

IMO D

(D) Most of the advertisers that purchase advertising space in the magazine will continue to spend the same amount on advertising per issue as they have in the past. - if they decrease the number of issues by half, profits will decline

nikeboy2008 wrote:IMO D

(D) Most of the advertisers that purchase advertising space in the magazine will continue to spend the same amount on advertising per issue as they have in the past. - if they decrease the number of issues by half, profits will decline

Correct But what i was Expecting was that U would give me an Option by option Judgement of what you thought about it.

Here is the important stuff:

1. The magazine is cutting the number of issues in half because of postage rates
2. The price will not change, the magazine will be larger, and quality remains the same.
3. No subscribers or advertisers will be lost

We want to know why their profits will decline despite these factors.

A. Incorrect. If the postage rises by 1/3 but they are cutting the number of issues in half they are going to lower their total postage costs over what they were the year before. Lower costs should mean higher, not lower profit.

B. Incorrect. The readers dont want to lose quality. The magazine is going to keep the same quality. That should mean that the readers will stay on board and continue to pay the cost, thus there will be no loss of profit.

C. Incorrect. This just tells us that if they increased the price people would still buy it. It has nothing to do with the current plan to keep the price the same nor indicates any reason profit will fall.

D. Correct. Lets use an example to illustrate: If advertisers used to spend $10 per issue in ads and there were 12 issues per year, each advertiser provided revenue of $120 to the magazine. Now the magazine is only going to produce 6 issues. If the ad revenue remains the same at $10 per issue the ad revenue generated is only going to be $60. That is a loss and gives evidence that profits will decline.

E. Incorrect. Nothing here would make us think profits would fall.

But in A , You havnt taken into consideration the Fact that Since the Number of Issues is halved, the Revenue shud also be halved if each issue was selling for a certain amount and the Number of issues is halved then Total Sales (Cost * Nmbr Of issues ) will be halved

mundasingh123 wrote:But in A , You havnt taken into consideration the Fact that Since the Number of Issues is halved, the Revenue shud also be halved if each issue was selling for a certain amount and the Number of issues is halved then Total Sales (Cost * Nmbr Of issues ) will be halved

You dont have to take that into account. make sure to read the passage closely to where it says subscription price will remain the same. In other words if they charged $10 for 12 issues they will now charge $10 for 6 issues. What I have labeled as point two is telling you is that their other costs will remain equal to now: quality remains the same meaning that they will still have the same highly compensated writers, article quantity remains the same meaning that the costs associated with the amount of articles remains the same since the writers are going to be paid for the same amount of articles as before, and price remains the same which tells us that they will maintain the same revenue stream from their customers despite the fact that there are less issues.

mundasingh123 wrote:But in A , You havnt taken into consideration the Fact that Since the Number of Issues is halved, the Revenue shud also be halved if each issue was selling for a certain amount and the Number of issues is halved then Total Sales (Cost * Nmbr Of issues ) will be halved

Market research shows that neither subscribers nor advertisers will be lost if the magazine's plan is instituted.
this implies that number of sales will not become half or decrease nor does the revenue..



Hope this helps

Jaxis.

fitzgerald23 wrote:

mundasingh123 wrote:But in A , You havnt taken into consideration the Fact that Since the Number of Issues is halved, the Revenue shud also be halved if each issue was selling for a certain amount and the Number of issues is halved then Total Sales (Cost * Nmbr Of issues ) will be halved

You dont have to take that into account. make sure to read the passage closely to where it says subscription price will remain the same. In other words if they charged $10 for 12 issues they will now charge $10 for 6 issues. .

This explains .Thanks a lot