1. Evaluation of a Plan
Situation Hotco produces a very efficient oil burner. It sells a burner to an asphalt
plant, stating that the price of the burner is how much money the plant saves on oil
using the new burner.
Reasoning Hotco will be at a disadvantage if which of the following occurs? Hotco is
to be paid based on how much money the plant saves on oil over a two-year period.
There is an assumption that a number of factors will remain relatively stable from
the previous two years to the next two years. What is a factor that could cause a
disadvantage for Hotco? If the price of oil goes up, then the plant will experience
smaller savings than Hotco anticipated, despite the plant’s using less oil than
previously because of its new, more efficient burners. If the plant’s savings go down,
Hotco will not get the payment it is expecting.
2. Evaluation of a Plan
Situation Universities own the patents resulting from government-sponsored
research at their institutions. One university plans to sell its patents to corporations
to fund a program to improve teaching.
Reasoning Which point casts doubt on the university’s plan? The university’s plan
assumes there will be a market for its patents, and that the corporations will want to
buy them. What might make this untrue? If some of the corporations have already
done the same or similar research, they will not be prospective buyers of the
3. Evaluation of a Plan
Situation Because the lack of available money for development loans is harming
businesses, the government plans to modify the income-tax structure, encouraging
taxpayers to put more money into retirement accounts. This plan is intended to
ensure that with more money put into these accounts, more money will in turn be
available to business borrowers.
Reasoning What potential flaw in this plan might prevent it from being effective?
What is the expectation behind the plan? The government’s plan supposes that the
money invested in retirement accounts will be available to business borrowers in the
form of development loans. Consider what circumstances might hinder that
availability. What if consumer borrowers compete with businesses? If it is known
that, historically, increased savings in personal retirement accounts corresponds
with increased consumer borrowing, then the government’s effort to target
businesses as the beneficiaries of this plan could well fail.
4. Evaluation of a Plan
Situation Low enrollment in physics classes is blamed on the lack of relevance of the
current curriculum to the current world. To attract more students, the board
proposes a new curriculum emphasizing the principles of physics involved in
producing and analyzing visual images.
Reasoning What is the best reason for the success of this plan? To attract more
students, the class must be relevant to today’s world. Evidence that the proposed
content of the curriculum is indeed relevant would provide strong support for the
plan. If producing and analyzing visual images is of major importance in
communications, business, and recreation, the curriculum has clear relevance to
today’s world and should therefore attract more students.
5. Evaluation of a Plan
Situation An insurance company considers an affordable policy for the elderly, but
the company’s income from the policies must exceed expenditures on claims.
Reasoning What strategy will minimize the company’s losses? The insurance
company’s proposed plan would include a high-risk group, the elderly, who are likely
to submit claims immediately. By expanding the customer base to include those who
are less likely to submit claims for many years, the company will increase its income
and thus minimize its losses.
6. Evaluation of a Plan
Situation Transporting goods to Burland Island by truck takes many hours, because
the trucks must take the congested single bridge that reaches the island. Trains can
get goods to the channel separating Burland from the mainland more quickly than
trucks can, and the freight cars can then be loaded onto barges that can cross the
channel in an hour. Trancorp plans to reduce shipping time by switching from trucks
to trains and barges.
Reasoning What would it be most important to know in determining whether
Trancorp will achieve its goal of reducing shipping time? Trancorp’s plan could fail to
reduce shipping time if there were some aspect of the new shipping process,
involving the trains and the barges, that took more time than anticipated.
7. Evaluation of a Plan
Situation The Eurasian ruffe, a species not native to the Great Lakes, is threatening
the native lake whitefish. Government agencies hope that wallet-sized cards
identifying the ruffe, explaining the danger they pose, and asking anglers to report
their ruffe catches will help them track the ruffe’s spread.
Reasoning What point would support the idea that the agencies’ action will have its
intended effect? The cards are intended to help government agencies track the
ruffe’s spread. They will be useful for this purpose only if anglers actually report the
ruffe they catch. Thus anything that increases the odds of anglers’ doing such
reporting would make it more likely that the cards will have their intended effect.
8. Evaluation of a Plan
Situation Two years ago, Runagia’s government attempted to improve senior
citizens’ welfare by increasing senior citizens’ pensions by 20 percent. Unfortunately,
many of those senior citizens’ welfare did not improve. This result occurred despite
inflation being relatively low—below 5 percent—and all appropriate people
receiving their increased pensions.
Reasoning What would do most to explain why many of Runagia’s senior citizens are
no better offthan they were before their pensions increased? Many of Runagia’s
senior citizens were not helped by receiving more money. Clearly, these senior
citizens used nearly 20 percent more money than they did before to maintain the
same standard of living. Usually, this could be explained by high inflation—but the
further information informs us that the annual rate of inflation was well below the
percentage of the pension increase. The annual rate of inflation is, however, an
average calculated over a large number of goods and services. The prices of some
goods and services rise more than the prices of other goods and services. It could be
the case that the goods and services senior citizens need are those that have risen
most in price. If this were the case, their pension increase could have been
insufficient to raise their standard of living.
9. Evaluation of a Plan
Situation Movie attendance in Washington County is large enough (though barely so)
to allow the cinemas to make a modest profit. The county’s population is expected
to remain approximately the same. Despite this, investors wish to double the
number of movie screens in the county. They expect both that the new screens will
be profitable and that the established cinema operators will continue to maintain
Reasoning What piece of information would most help justify the investors’
expectation? To make twice the number of movie screens profitable, movie
attendance in Washington County would have to increase. But how could this
happen, given that the county’s population is not expected to change? Clearly, some
people in Washington County will need to go to the movies more often than they do
now. This might happen if some of the population of Washington County were to
age into a demographic that is likely to go to the movies more frequently.
10. Evaluation of a Plan
Situation An automaker is planning to offer deep discounts on its vehicles’ prices in
order to increase its market share. The automaker’s profit margins will be reduced
by this action. By advertising the discounts, the automaker hopes to attract
customers who might otherwise be inclined to buy rival manufacturers’ cars. These
customers would ideally then develop loyalty to the automaker’s cars.
Reasoning What would it be most useful to know in assessing whether offering deep
discounts will enable the automaker to increase its market share? To achieve an
increase in market share, the automaker would have to take customers away from
other automakers. Under what circumstances would other automakers be able to
retain their customers, if those customers are more likely to purchase cars from
automakers that offer deep discounts (and then remain loyal to those automakers)?
The other automakers might try to retain their customers by matching the discounts.
Thus it would be useful to know whether the other automakers would indeed offer
11. Evaluation of a Plan
Situation Mail-order company TrueSave wants to reduce the number of items
damaged while in transit to customers. Packaging consultants recommended that to
achieve this goal, the company should use more packing material to fill empty spaces
in its cartons. The company’s packers began using as much packing material as they
could, yet reports of damaged items rose rather than fell.
Reasoning What would help explain why the company’s acting on the
recommendation did not achieve its goal? The recommendation involved increasing
the amount of packing material, so there must have been something about that
increase that led to more damage. More damage would be likely to result if stuffing
more packing material into shipping boxes made the packaging less effective.
12. Evaluation of a Plan
Situation The city council of Traverton is considering replacing burned-out
incandescent traffic signal lights with LED arrays. The LED arrays consume less
energy than incandescent bulbs do while costing no more than those bulbs. Further,
the cost of converting existing fixtures to accept LED arrays would be minimal.
Reasoning What would it be most important to know in determining whether the
switch to LEDs would minimize the city’s yearly maintenance costs? LEDs cost no
more than incandescent bulbs, and they consume less energy. This suggests that the
overall cost of LEDs is lower than that of incandescent bulbs. Is there any
circumstance under which the costs associated with LEDs might be higher? They
might be higher if more LEDs than incandescent bulbs had to be purchased every
year—and that would be necessary if LEDs burn out more quickly than incandescent
13. Evaluation of a Plan
Situation The introduction of AMT is making workers’ occupational skills obsolete
within as little as five years.
Reasoning Which plan will be most effective in helping the company prepare for the
expected rapid obsolescence in occupational knowledge and skills? It should be clear
that some type of training or retraining will be involved, since (at least in certain
types of industry) it is unlikely that any company in that industry can afford to avoid
introducing AMT if its market competitors are doing so.
14. Evaluation of a Plan
Situation A company considers changing all employees’ starting time from 8 a.m. to
individually flexible arrival hours, anytime from 6 to 11 a.m.
Reasoning Under what conditions could this plan cause employees’ productivity to
decline? Consider the job functions defined in the answer choices and determine
which entails requirements that would most likely be in conflict with the proposed
plan. A plan that allows a fivehour range of start times would make it far more
difficult for employees to coordinate their schedules. This would make it difficult, if
not impossible, for employees to collaborate wiTheach other throughout the
workday and could well decrease productivity.
15. Evaluation of a Plan
Situation An airline flies in and out of a highly congested airport many times a day.
Because the airline’s success depends on low costs and quick turnaround, it plans to
replace its current planes with Skybuses, whose more fuel-efficient design will
reduce both fuel costs and the time spent refueling.
Reasoning What could be a serious disadvantage of the plan? Since it is given that
the Skybuses provide fuel economy and quicker refueling, what could be a
disadvantage of the proposed plan? What if the use of the particular aircraft
somehow contributed to the congestion at the busy airport or caused slower
turnaround? While the Skybus’s design promotes fuel economy, if it also creates
turbulence on takeoff, the turbulence would then delay the takeoffs of any other
planes. Since the airport is congested and the airline flies through it many times a
day, such take-off delays would ultimately impede Northern Air’s turnaround time,
as well as its success.