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CAT Critical Reasoning Practice question with Solution 69

Oil analysis predict that if the price of oil fails by half, the consumer's purchase price for gasoline made from this oil will also fall by half.

Which one of the following, If true, would cast the most serious doubt on the prediction made by the oil analysts?

[A]. Improved automobile technology and new kinds of fuel for cars have enabled some drivers to use less gasoline.
[B]. Gasoline manufacturers will not expand their profit margins.
[C]. There are many different gasoline companies that compete with each other to provide the most attractive price to consumers.
[D]. Studies in several countries show that the amount of gasoline purchased by consumers initially rises after the price of gasoline has fallen.
[E]. Refining costs, distribution costs, and taxes, none of which varies significantly with oil prices. constitute a large portion of the prices of gasoline.
Answer: E

According to the analysts, if oil prices drop by half, then the purchase price of gasoline made from the oil should drop by half too; that’s all there is to it. We’re asked to weaken this simplistic argument, and choice (E) does the job by providing an alternative account of the factors involved in gasoline prices. Choice (E) illuminates many other factors that, taken together, have a significant influence on the price of gasoline. Because these factors are not tied to oil prices, these costs won’t decrease simply because oil prices do. Therefore, because gasoline prices are largely based on the independent costs mentioned in answer choice (E), we shouldn’t expect gasoline prices to drop by half just because oil prices drop by half.

(A) has no bearing on the question, which concerns the actual cost of gasoline, not the amount of gasoline consumers purchase. Also, (A) is limited to only some drivers, which severely limits its impact on the argument.

(B) If anything, answer choice (B) strengthens the analysts’ argument by showing that gas manufacturers won’t try to increase profits by deliberately keeping the cost of gas artificially high.

(C) is awfully vague; we’re not told anything about the effect of competition on oil prices, or about how analysts worked this factor into their analysis. If anything, fierce competition suggests that prices will be kept as low as possible, which wouldn’t hurt the argument at all. Of course, since none of this is contained in the argument, this is all conjecture on our part, which means we must reject (C) immediately as irrelevant.

(D) The event (D) describes —increased consumption—happens after the price has already dropped. The relevant issue, however, is how much prices will drop; what happens afterwards is beside the point.

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