An Electric-Power Company Gained Greater Profits and Provided Electricity GMAT Critical Reasoning

Question: An electric-power company gained greater profits and provided electricity to consumers at lower rates per unit of electricity by building larger-capacity more efficient plants and by stimulating greater use of electricity within its area. To continue these financial trends, the company planned to replace an old plant by a plant with triple the capacity of its largest plant.

The company's plan as described above assumed each of the following EXCEPT:

1. Demand for electricity within the company's area of service would increase in the future.
2. Expenses would not rise beyond the level that could be compensated for by efficiency or volume of operation, or both.
3. The planned plant would be sufficiently reliable in service to contribute a net financial benefit to the company as a whole.
4. Safety measures to be instituted for the new plant would be the same as those for the plant it would replace.
5. The tripling of capacity would not result in insuperable technological obstacles to efficiency.

Answer: D
Explanation:
The GMAT's critical reasoning portion will evaluate your capacity for analysis and critical thought. A person needs to have high cognitive abilities to respond clearly.
To reach a decision, each option must be critically examined. Of the five options provided, only one will be accurate. The candidate must evaluate many factors to make the best decision.
Let’s check the given choices -

A: Incorrect
It is an incorrect choice. This is a reasonable assumption to make. Why? Because there won't be any growth in the profit if there isn't a corresponding rise in the amount of electricity that is demanded. Consequently, there is a need for a rise in the demand for power. Hence, it is eliminated.

B: Incorrect
It is the wrong choice. This is a reasonable assumption to make. Why? Because if the expenses continue to climb above the level that might be paid by the level of operating efficiency, volume, or both, then the profit that is obtained will continue to decrease. Therefore, it is necessary for us to assume that the costs will not exceed a particular threshold. Hence this choice is eliminated.

C: Incorrect
It is an incorrect answer. This is a reasonable assumption to make. Why? Because this choice suggests providing additional advantages to the business as a whole, which is an assumption that ought to be considered reasonable. Hence it is eliminated.

D: Correct
It is the correct answer. This is an incorrect assumption to make. Concerning the amount of money that can be made by the new facility, we have a great deal of anxiety. Therefore, there is no reason for us to make any presumptions regarding the preventative actions. This is the option that should be chosen as the correct response given that we are searching for one that does not involve a prerequisite assumption.

E: Incorrect
It is an incorrect choice. This is a reasonable assumption to make. Why? because if tripling the capacity would have a negative impact on efficiency, then increasing the profit would be impossible in such a scenario. Therefore, it is imperative that there be no problem that impacts the effectiveness of the plant. This choice is eliminated.

“An electric-power company gained greater profits and provided electric” – is a GMAT Critical question. To answer the question, a candidate can either find a piece of evidence that would weaken the argument or have logical flaws in the argument. GMAT critical reasoning tests the logical and analytical skills of the candidates. This topic requires candidates to find the argument's strengths and weaknesses or the logical flaw in the argument. The GMAT CR section contains 10 -13 GMAT critical reasoning questions out of 36 GMAT verbal questions.

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