To mitigate losses during an extended period of low sales, the insurance agents in the Bahamas have implemented unprecedented price hikes on all their policies. The agents are confident that this approach will be effective, despite it contradicting the typical correlation between price and demand. The agents’ strategy to boost profits is based on which of the following assumptions?

Answer Choices

Correct answer marked below

The increased profit made on policies sold will more than offset any decrease in sales resulting from the price hikes.

Correct

The smaller insurance agents will continue to capture a significant share of business from the larger agents.

Insurance agents will, out of necessity, raise prices whenever they launch a new policy.

New regulations requiring background checks for all new policies will not impose significant costs on agents.

Affordable financing options and long-term plans will draw in many cost-sensitive customers.

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Official Explanation

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The insurance agents in the Bahamas believe that by raising prices, they can still maintain or increase their profits despite a potential drop in sales. This belief hinges on the assumption that the increased profit from…

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Comments

JustinApr 21, 2025

thanks

VasistJan 15, 2025

thanks

YatharthJul 31, 2024

This is exactly what I needed to practice

What this question tests

What it tests

Whether you can identify the unstated assumption a critical-reasoning argument depends on.

Common trap

Picking an option that strengthens the argument or is merely relevant instead of one that is required.