Critical Reasoning

Because of the rising costs of gasoline, a small bus company has decided to decrease the number of weekend trips it runs to a nearby metropolitan area by one third. It will not lose any riders, because the decreased number of trips is adequate for the existing number of weekend riders. The company will save substantially on fuel costs and will have one fewer driver working on weekends. Moreover, the bus company will continue to raise revenue through print advertising inside the bus and on the bus ' s exterior.

Which of the following if true, provides the strongest evidence that the bus company ' s profits are likely to decrease if the company implements the plan?

a) Many of the weekend riders would continue riding the bus even if the fare was increased.
b)Most of the advertisers will continue to spend the same amount on advertising per mile and the displaced weekend driver will not earn more by switching to a weekday route at the company.
c) The displaced weekend driver will earn the same salary driving on weekdays and the advertisers will increase their advertising on the weekend.
d) Maintenance costs per bus will remain constant.
e) The increased cost of fuel increases the operating costs of one round trip by twenty per cent.

no IMO's please, i am lookign for explanations.

rohu27 wrote:Because of the rising costs of gasoline, a small bus company has decided to decrease the number of weekend trips it runs to a nearby metropolitan area by one third. It will not lose any riders, because the decreased number of trips is adequate for the existing number of weekend riders. The company will save substantially on fuel costs and will have one fewer driver working on weekends. Moreover, the bus company will continue to raise revenue through print advertising inside the bus and on the bus ' s exterior.

Which of the following if true, provides the strongest evidence that the bus company ' s profits are likely to decrease if the company implements the plan?

a) Many of the weekend riders would continue riding the bus even if the fare was increased.
b)Most of the advertisers will continue to spend the same amount on advertising per mile and the displaced weekend driver will not earn more by switching to a weekday route at the company.
c) The displaced weekend driver will earn the same salary driving on weekdays and the advertisers will increase their advertising on the weekend.
d) Maintenance costs per bus will remain constant.
e) The increased cost of fuel increases the operating costs of one round trip by twenty per cent.

no IMO's please, i am lookign for explanations.

Not 100% certain what Kaplan had in mind for this one, but answer choice B does present a possible loss of revenue for the company: If the advertisers pay per mile, but the company drives for fewer miles on the weekend (it runs fewer trips), then the company will lose advertizing revenue. Not sure how the second part of the answer choice (the displaced driver will not earn more switching to a weekday route) helps, except for maybe saying that they don't actually fire the guy - he'll still get his pay on the weekdays - so they don't save any expenses there.

However, this is flimsy - loss of revenues doesn't actually means decrease in profits, unless costs remain the same, and they don't - fewer trips means fewer gas costs. So B smells liek a trap, but none of the other answer choices work, or at least I'm not seeing it. In short, ask Kaplan .

I agree with Geva..Nice explanation.

so is it B?

C sounds more tempting. ITS C

close call between B and C here.

advertising per mile vs the advertising during the weekends.

advertising revenue per mile traveled by two buses will be more than that of one bus. Hence the revenue takes a hit here.More so the driver earns more here by the switch. B hold it.

more advertising but less number of buses here and the driver earns the same salary. not effective.

Thus a clean B here.