Critical Reasoning — The Little Old Lady from Pasadena

Teamwork — GMAT Question of the Day
September 14, 2021
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Critical Reasoning — The Little Old Lady from Pasadena

When we read the question, we are asked something rather specific: which strategy will maximize profits in the new policy. It looks like we might be able to largely ignore the conclusion of the argument and focus on a critical detail. It's a perfect example of why we should keep an eye on the question stem while digesting the prompt.

We can make a prediction: Profits marginas are a ratio of revenues to costs, so our strategy will maximize revenues and/or minimize costs. The stem is concerned heavily with revenues--we have a limited audience to target, but they are price sensitive. So, let's look for an answer that will minimize the costs from our elderly, accident-prone demographic.

Testing this prediction, we find a match in the form of answer choice (B). Choices (C) and (D) argue with the facts: this policy is for elderly drivers. Choice (A) describes an option that will cost more than (B), since Nationside will have to pay out more to cover accidents, so it's only better if we can jack up the revenues in (A) much higher than in (B). But the second sentence of the argument implies that we can't do that. So (A) is objectively inferior to (B) and is out. Choice (E) is similar to (A): if the drivers were rejected by other policies, it's probably because they are more expensive. Or, if that's outside knowledge that we're not supposed to bring to bear on this question, (E) is simply irrelevant.

The correct answer is (B).

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