Examkin

Question

Difficulty: EasyApplication to Analogous Situations

Many supermarkets employ a pricing strategy known as the 'loss leader.' In this approach, a store intentionally sells a highly popular, everyday item—such as milk or bread—at a price lower than its wholesale cost, thereby taking a financial loss on every sale of that item. The underlying rationale is that customers will be drawn into the store to purchase the discounted item and, while there, will also buy several other items that carry high profit margins. Ultimately, the profits generated from these additional purchases more than compensate for the initial financial loss.

Which of the following scenarios is most logically analogous to the pricing strategy described in the passage?

  1. A technology company sells a video game console at a price significantly below manufacturing costs, anticipating that consumers will subsequently purchase numerous high-margin video games exclusively compatible with that console.Answer
  2. B
    A grocery store heavily discounts its fresh produce just before it spoils, ensuring that the store recovers at least a fraction of its wholesale cost rather than losing the entire investment.
  3. C
    A luxury boutique prices its designer handbags exceptionally high to create an aura of exclusivity, which successfully draws wealthy customers into the store to view the items.
  4. D
    A local gym offers a free one-month trial membership to all new residents in a neighborhood, with a strict policy that prohibits these residents from purchasing a standard membership once the trial ends.
  5. E
    A furniture store always sells every single item in its inventory at a slight loss during its annual holiday weekend sale, guaranteeing that it will quickly sell out of all merchandise.

Answer

The scenario where a technology company sells a video game console below cost to drive the sales of high-margin compatible games.
The correct answer perfectly mirrors the functional relationship described in the passage. Just as the supermarket takes a loss on milk to sell profitable secondary items, the technology company takes a loss on the console to sell highly profitable video games. Both rely on a 'loss leader' to drive subsequent, compensating purchases.

Step-by-Step Solution

1
Analyze the source principle in the passage.
The core logic is: Intentional initial loss on Item X -> Attracts customer -> Customer buys Item Y (high profit) -> Total profit covers the initial loss.
To find an analogous situation, we must abstract the passage's specific scenario into a general logical structure.
2
Evaluate the options against the abstracted logical structure.
Only the video game console scenario matches perfectly: Initial loss on console (Item X) -> Attracts customer -> Customer buys high-margin games (Item Y) -> Total profit achieved.
An analogous situation must share the functional and logical relationships of the original, regardless of the subject matter.

Key Concept

Identifying Analogous Situations by Abstracting Core Logical Structure
Estimated Time:1m 15s
Rate this question

Topics

Application to Analogous Situations

More questions from this topic