GMAT Section 3 practice questions, page 27 of 31, with answer review and explanations.
Question 131
Shereen cosmetics sometimes discount the price of its premium eye shadows to retailers for a promotion period when the product is advertised to consumers. Such promotions often result in a dramatic increase in amount of premium eye shadows sold by the manufacturers to retailers. Nevertheless, the manufacturers could often make more profit by not holding the promotions. Which of the following, if true, most strongly supports the claim above about the manufacturers' profit?
The amount of discount generally offered by manufacturers to retailers is carefully calculated to represent the minimum needed to draw consumers' attention to the eye shadows.
For many consumer products the period of advertising discounted prices to consumers is about a week, not sufficiently long for consumers to become used to the sale price.
For cosmetics that are not newly introduced, the purpose of such promotions is to keep the products in the minds of consumers and to attract consumers who are currently using competing products.
During such a promotion retailers tend to accumulate in their warehouses inventory bought at discount; they then sell much of it later at their regular price.
If a manufacturer fails to offer such promotions but its competitor offers them, that competitor will tend to attract consumers away from the manufacturer's product.
Question 132
New home buyers are all financially protected against bankruptcy of the contractor because of a law requiring the contractor to get bank backing to insure all individual investments. An economist argues that this insurance is partly responsible for the high rate of bankruptcies among contractors, since it removes from buyers any financial incentive to find out the financial status of the contractor they are hiring. If buyers were more selective, then contractors would need to be secure in order to compete for buyers. The economist's argument makes which of the following assumptions?
Bankruptcy is caused when contractors default on loan repayments to their banks.
A significant proportion of contractors use the services of sub-contractors to do the bulk of the work.
The more a homebuyer has to invest in a house he or she is building, the more careful he or she tends to be in selecting a contractor.
The difference in the payment schedules to contractors is not a significant factor in bankruptcies.
People looking for a contractor to build their houses are able to determine which contractors are secure against bankruptcy.
Question 133
Which of the following, if true, most seriously weakens the economist's argument?
Before the law requiring the contractor to get bank backing to insure all individual investments was passed, there was a lower rate of bankruptcy than there is now.
When the law did not insure buyers against the bankruptcies of building contractors, frequent bankruptcies occurred as result of depositors' fears of investing money in a newly built house.
Surveys show that a significant proportion of new home buyers are aware that their investments are protected by law.
There is an upper limit on the amount of an individual's investment for which a contractor is required by law to get bank backing, but very few individuals' investments exceed this limit.
The security of a contractor against bankruptcy depends on the percentage of its assets reinvested into the business.
Question 134
Between 1990 and 1998, occupancy in Branson Hospital averaged 79 percent of capacity, while admission rates remained constant, at an average of 9 admissions per 100 beds per year. Between 1998 and 2002, however, occupancy rates increased to an average of 85 percent of capacity, while admission rates declined to 8 per 100 beds per year. Which of the following conclusions can be most properly drawn from the info given above?
The average stay for Branson Hospital residents rose between 1998 and 2002.
The proportion of children staying in Branson hospital was greater in 2002 than in 1990.
Hospital admission rates tend to decline whenever occupancy rates rise.
Hospitals built prior to 1998 generally had fewer beds than did hospitals built between 1998 and 2002.
The more beds a nursing home has, the higher its occupancy rate is likely to be.
Question 135
American customers expect high quality. When the quality of a manufactured product is raised, it in turn raises customer expectations. A company that believes that the quality of its products is satisfactory will soon discover that its customers are not similarly satisfied. The goal of Sunnybrook Corporation is to meet or exceed customer expectations. Which of the following must be true on the basis of the statements above?
Sunny brook'scompetitors will succeed in attracting customers only if those competitors adoptSunny brook'sgoal as their own.
A company that does not correctly forecast the expectations of its customers is certain to fail in advancing the quality of its products.
It is possible to meet the goal of Sunnybrook Corporation only if the quality of their products can be continually improved upon.
If a company becomes satisfied with the quality of the products it manufactures, then the quality is likely to decline.
Sunnybrook's customers are currently satisfied with the quality of its products.