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Verbal Ability
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Question Type : Multiple Choice Question
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Directions for questions 1 to 4: Read the following passage carefully and answer the questions given below the passage.

Restaurants are not like retailers. The price should not start high when it hits the shelf and bottom out on the clearance rack. Many restaurant owners think it works as simply as that. They are convinced that restaurant pricing is simple supply and demand; when price is lowered or a deal is offered, traffic increases.

In actuality, restaurant owners have to be very careful to distinguish between effective discounting and brand-damaging devaluing. Thousands of restaurant owners believe that their promotions are providing a discount that will be helpful to their business while they are actually devaluing the food and/or dining experience.

Customers smell blood when a restaurant drops its prices, if they notice at all. Customers decide if the discount is reasonable or desperate (devaluing). If it is seen as desperate, the customer will never be convinced that the pre-discounted or “normal” price is not a rip-off or they will assume the business is in trouble. The discounted price often becomes the new “normal” price. It is because the psychology of your customer frequently does not reflect simple supply and demand. Customers assume price stability at restaurants and find price changes, whether radical deals, price hikes or discounts as suspicious. No restaurant owner will ever argue that we are rational about food.

Question No. 1

The primary purpose of the passage is to

question the thesis that discounting has an adverse impact in the restaurant industry


discuss potential advantages and disadvantages of discounting in the restaurant industry


examine the conventional wisdom regarding the effect of discounting in the restaurant industry


consider the impact that discounting can have on the service provided by a restaurant

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