PrepTest 101, Section 3, Question 14
In an effort to boost sales during the(30 more words not shown)
Each of the following, if(10 more words not shown)
- AThe soft-drink industry(10 more words not shown)
- BFoamy Soda's competitors(10 more words not shown)
- CBecause of an(17 more words not shown)
- DA strike at(21 more words not shown)
- EThe weather during(12 more words not shown)
Reading the argument
A lower price doesn't guarantee more customers. Some shoppers might even read the price cut as a signal that Foamy Soda is a cheaper-quality product. That belief needn't be justified to affect what they buy.
That's one possible response to the surprising result, but the price cut needn't have caused the decline. What if consumers were cutting spending generally? What if bad publicity about the drink made people avoid it? Either could outweigh the appeal of a lower price. We shouldn't assume the company's pricing decision is the only thing that changed.
What we’re looking for
This is an EXCEPT question. Four choices help explain how the sales could fall despite the lower price; one doesn't. We need to keep our attention on sales. A fact about some other aspect of the business won't answer the puzzle unless it gives us a reason purchases could have declined.
Working the answers
- A
If soft-drink sales were depressed across the industry, Foamy Soda could be affected by the same broader difficulty. Its lower price might not be enough to overcome that decline. We aren't told the exact cause of the industry's trouble, but the wider pattern helps explain why this company's sales could fall too.
- B
Customers compare available options. Foamy Soda could lower its price and still become less attractive relative to competitors that cut theirs even more. The company's own price went down, but that doesn't mean it gained the price advantage it hoped for. This gives a plausible explanation of the result.
- CCorrect
Higher production costs can reduce profit without explaining a drop in sales. Suppose the company sells the same number of cans at the same price, but each can costs more to make. Money coming in from those sales stays the same while the money left after production costs falls. That would explain lower profit, not lower sales.
Could rising costs eventually lead to something that affects sales, such as a supply reduction? Perhaps, but C doesn't give us that extra step. It only raises the cost of sweeteners. We shouldn't invent the missing connection to customers buying less.
- D
A low price can't attract a purchase from a store that doesn't have the product. The strike reduced production and prevented many stores from getting normal shipments. That directly explains how sales could fall despite a price meant to encourage buying: less soda was available to buy.
- E
The weather supplies another influence on demand. If the unusually cool summer reduced people's desire for soft drinks, Foamy Soda's price cut might not make up for that lost demand. Summer being a good season in general doesn't guarantee a good result in this particular summer.
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