Wholesale cereal prices

The solution below is taken from the GMATFix App.



-Patrick

So remember that when you approach a CR question, you have to REALLY break down the passage and THOROUGHLY understand the argument before you can even deal with the answer choices. Know what type of question it is, understand the passage itself, pre-phrase an answer, THEN use strong process of elimination to narrow them down. When you get to the final two, ask: which one of these is most effectively doing the JOB of the question-stem (i.e. weakening, strengthening, etc.)

So now that we've talked strategy, here's how I'd approach this l'il guy:

Question-type: Complete the Passage

That tells us: We need to know what the blank represents.

Passage breakdown: C going to reduce wholesale price 20% b/c consumer switch.

Our interpretation: They think this will be effective, but are most of their sales really wholesale? And even doing this, they could still lose $$.

Passage breakdown: C assumes supermarkets pass on savings.

Our interpretation: Okay, assuming supermarkets are buying wholesale, if they're only paying 80%, then they could theoretically charge 20% less, and consumers would be happy.

Passage breakdown: Supermarkets usually do this, this time they won't.

Prediction: Something that explains WHY the supermarkets won't "pass on" savings. Maybe they are greedy, or have another incentive.

Answer choice analysis:

A) other C's reducing $$ -- then wouldn't the markets reduce ALL prices, perhaps?
B) avg price keeps going up -- still doesn't explain why markets wouldn't adjust down
C) total sales up -- maybe slight greed incentive?
D) if they DID lower the price, it could hurt their profits - KEEP
E) C's price same as others -- still doesn't explain why they wouldn't lower for 1 brand

The correct answer is (D). Only (C) and (D) were possibilities here, and (D) went so much further to explain WHY they wouldn't lower their price by suggesting a negative consequence for the supermarkets.