Read the following passage and answer the question that follows:

It is easy for the government to control State-owned companies through nods and winks. So, what really needs to be done as a first step is to put petrol pricing on a transparent formula if the price of crude is x and the exchange rate y, then every month or fortnight, the government announces a maximum price of petrol, which anybody can work out from the x and the y. The rule has to be worked out to make sure that the oil-marketing companies can, in general, cover their costs. This will mean that if one company can innovate and cut costs, it will make greater profits. Hence, firms will be more prone to innovate and be efficient under this system. Once the rule is announced, there should be no interference by the government. If this is done for a while, private companies will re-enter this market. And once a sufficient number of them are in the fray, we can remove the rule-based pricing and leave it truly to the market (subject to, of course, the usual regulations of anti-trust and other competition laws).

According to the passage, an oil company can make greater profits, if a transparent formula for petrol pricing is announced every fortnight or month, by
1. promoting its sales.
2. undertaking innovation.
3. Cutting costs.
4. selling its equity shares at higher prices.

Question

Read the following passage and answer the question that follows:

It is easy for the government to control State-owned companies through nods and winks. So, what really needs to be done as a first step is to put petrol pricing on a transparent formula if the price of crude is x and the exchange rate y, then every month or fortnight, the government announces a maximum price of petrol, which anybody can work out from the x and the y. The rule has to be worked out to make sure that the oil-marketing companies can, in general, cover their costs. This will mean that if one company can innovate and cut costs, it will make greater profits. Hence, firms will be more prone to innovate and be efficient under this system. Once the rule is announced, there should be no interference by the government. If this is done for a while, private companies will re-enter this market. And once a sufficient number of them are in the fray, we can remove the rule-based pricing and leave it truly to the market (subject to, of course, the usual regulations of anti-trust and other competition laws).

According to the passage, an oil company can make greater profits, if a transparent formula for petrol pricing is announced every fortnight or month, by
1. promoting its sales.
2. undertaking innovation.
3. Cutting costs.
4. selling its equity shares at higher prices.

Accepted Answer

Correct Option: (B) 2 and 3 According to the passage, companies can make greater profits through innovation and cost-cutting under the transparent formula system

According to the passage, an oil company can make greater profits, if a transparent formula for petrol pricing is announced every fortnight or month, by\n1. promoting its sales.\n2. undertaking innovation.\n3. Cutting costs.\n4. selling its equity shares at higher prices.

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