Because of an upcoming increase in the rent for the performance space used by the Greenland Theatre company, the company plans to maximize profits by reducing by one-half the length that each of the shows in its upcoming season will run, from two months to one month. Over 90 percent of the company's regular audience consists of subscribers, and the subscription price will remain the same, as will the number and quality of shows produced. Extensive surveys show that neither subscribers nor advertisers will be lost if the company's plan is instituted.
Which of the following, if true, provides the strongest evidence that the theatre company's profits are likely to decline if the plan is instituted?
The actors' union requires that a company the size of Greenland Theatre must contractually hire actors for a minimum of three months, and shows generally do not require more than a month of rehearsal.
The majority of the company's subscribers are less concerned about a possible drop in the number of performances than they are about a possible decrease in the quality of those performances.
Since Greenland Theatre is one of the few reputable theatre companies in the area, many of the company's subscribers would still renew their subscriptions if the subscription prices increased.
Most of the advertisers that purchase space in the programs for the different productions will continue to spend the same amount on advertising per week as they have in the past.
Production costs, including playwright royalties, fees for designers, and set and costume building expenses, are expected to remain stable.
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alex.gellatly
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In my opinion, the answer should be D. My reasoning is this: The theater is going to decrease the amount of weeks it shows run for. They will not lose any customers nor advertisers. How will they lose money? If the advertisers don't pay as much. How will they not pay as much? If they pay the same per week (with less weeks). What's the OA and source?imskpwr wrote:Because of an upcoming increase in the rent for the performance space used by the Greenland Theatre company, the company plans to maximize profits by reducing by one-half the length that each of the shows in its upcoming season will run, from two months to one month. Over 90 percent of the company's regular audience consists of subscribers, and the subscription price will remain the same, as will the number and quality of shows produced. Extensive surveys show that neither subscribers nor advertisers will be lost if the company's plan is instituted.
Which of the following, if true, provides the strongest evidence that the theatre company's profits are likely to decline if the plan is instituted?
The actors' union requires that a company the size of Greenland Theatre must contractually hire actors for a minimum of three months, and shows generally do not require more than a month of rehearsal.
The majority of the company's subscribers are less concerned about a possible drop in the number of performances than they are about a possible decrease in the quality of those performances.
Since Greenland Theatre is one of the few reputable theatre companies in the area, many of the company's subscribers would still renew their subscriptions if the subscription prices increased.
Most of the advertisers that purchase space in the programs for the different productions will continue to spend the same amount on advertising per week as they have in the past.
Production costs, including playwright royalties, fees for designers, and set and costume building expenses, are expected to remain stable.
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umeshpatil
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Increase in rent of space, So, Cut the cost of rent by Half by making the show lenghth from 2 months to 1 month.
Assuming, Reducing Show lengh will not affect subscribers(viewers) and Quality
It is of 'Weaken' type question.
A) Actors must be hired for 3 months. So, it is unavoidable in any case in the past and future. It doesn't help to say profit will be declined.
B) Quality is important. Company is going to ensure the quality.
C) So, Even subscription price increased, there is no loss to company.
D) This is special case. Advertisers use space during the performance in the theatres. If Company reduces performance from 2 to 1 month. Obviously, Money coming from Advertisements will reduce. This will decline profit. So, It is the answer.
E) If this is true, it will not affect our conclusion.
Assuming, Reducing Show lengh will not affect subscribers(viewers) and Quality
It is of 'Weaken' type question.
A) Actors must be hired for 3 months. So, it is unavoidable in any case in the past and future. It doesn't help to say profit will be declined.
B) Quality is important. Company is going to ensure the quality.
C) So, Even subscription price increased, there is no loss to company.
D) This is special case. Advertisers use space during the performance in the theatres. If Company reduces performance from 2 to 1 month. Obviously, Money coming from Advertisements will reduce. This will decline profit. So, It is the answer.
E) If this is true, it will not affect our conclusion.
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alex.gellatly
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imskpwr, we are still waiting for OA and source
A useful website I found that has every quant OG video explanation:
https://www.beatthegmat.com/useful-websi ... tml#475231
https://www.beatthegmat.com/useful-websi ... tml#475231
imskpwr wrote:Because of an upcoming increase in the rent for the performance space used by the Greenland Theatre company, the company plans to maximize profits by reducing by one-half the length that each of the shows in its upcoming season will run, from two months to one month. Over 90 percent of the company's regular audience consists of subscribers, and the subscription price will remain the same, as will the number and quality of shows produced. Extensive surveys show that neither subscribers nor advertisers will be lost if the company's plan is instituted.
Which of the following, if true, provides the strongest evidence that the theatre company's profits are likely to decline if the plan is instituted?
The actors' union requires that a company the size of Greenland Theatre must contractually hire actors for a minimum of three months, and shows generally do not require more than a month of rehearsal.
There are no changs in contract with actors, hence it won't impact the profit of the company.
The majority of the company's subscribers are less concerned about a possible drop in the number of performances than they are about a possible decrease in the quality of those performances.
It's mentioned that quality of shows will not decline as well as the subscribers. Hence no impact on profit.
Since Greenland Theatre is one of the few reputable theatre companies in the area, many of the company's subscribers would still renew their subscriptions if the subscription prices increased.
This will add to the progit of the company.
Most of the advertisers that purchase space in the programs for the different productions will continue to spend the same amount on advertising per week as they have in the past.
Things to note in the question is that number of shows will not decrease but total duration will be one month instead of two months. Since Ad comp are not going to increase the amount, they will now pay for 4 weeks as opposed to 8 weeks. Correct.
Production costs, including playwright royalties, fees for designers, and set and costume building expenses, are expected to remain stable.
No impact on profit.
