Critical Reasoning — Implicit Assumptions Decision: “The company will increase the price of all its products to tackle its precarious financial position.”
-
AOnly I and III are implicit
-
BOnly II is implicit
-
COnly II and III are implicit
-
DNone is implicit
-
ENone of these
Answer
Correct Answer: Only II is implicit
Explanation
Introduction / Context:A firm in financial difficulty plans to raise prices across the board. We must identify which background belief is essential for this to be a sensible step toward improvement.
Given Data / Assumptions:
- I. The company may wipe out all past losses by this decision.
- II. Buyers may continue to buy even after the increase.
- III. The company has enough resources to continue production for a few more months.
Concept / Approach:Price hikes only improve finances if revenue holds or improves (price * quantity). The key necessity is that demand does not collapse after the increase.
Step-by-Step Solution:
1) II is necessary: if customers stop buying, revenue falls and finances worsen. Some level of continued demand is assumed.2) I is not required; the goal may be to stabilize cash flow, not to erase all cumulative losses.3) III is about short-term resources; the price decision does not depend on how many months of production remain. The action could be taken even with tight resources.Verification / Alternative check:Negate II (buyers will not buy): the decision would be counterproductive. Negating I or III does not directly invalidate the logic behind raising prices.
Why Other Options Are Wrong:
- I and III / II and III / None: each misses the central demand assumption captured in II.
Common Pitfalls:Assuming strategic goals must “wipe out all losses,” or confusing liquidity horizon with pricing rationale.
Final Answer:Only II is implicit