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On Monday, Daisy s Lemonade Stand sold lemonade at 20 cents [#permalink]

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11 Aug 2010, 13:03

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A

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Question Stats:

66% (01:59) correct
34% (01:04) wrong based on 140 sessions

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On Monday, Daisy’s Lemonade Stand sold lemonade at 20 cents per cup. The Lemon Shack sold lemonade at 30 cents per cup. At the end of the day, Daisy’s Lemonade Stand and the Lemon Shack reported identical revenues and identical profits.

The statements above best support which of the following assertions?

A.On Monday, Daisy’s Lemonade Stand sold fewer cups of lemonade than did the Lemon Shack. B.The Lemon Shack sells higher quality lemonade than does Daisy’s Lemonade Stand. C.On Monday, Daisy’s Lemonade Stand and the Lemon Shack incurred identical costs to run their businesses. D.In general, lemonade consumers prefer the lemonade at Daisy’s Lemonade Stand to the Lemonade at the Lemon Shack. E.The Lemon Shack would not increase its revenues by lowering its prices.

Re: Manhattan_CR (On Monday, Daisy’s Lemonade Stand sold...) [#permalink]

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11 Aug 2010, 16:50

IMO....D

If Daisy's Lemonade Stand and the Lemon Shack reported identical revenues and profits, then it follows that Daisy's Lemonade Stand, at a lower price point, sold more cups of lemonade. As such, it is fair to assume that customers prefer Daisy's Lemonade to the Lemon Shack.

Re: Manhattan_CR (On Monday, Daisy’s Lemonade Stand sold...) [#permalink]

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11 Aug 2010, 18:36

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Profit = revenue - cost of operations if profit and revenue are the same for both Daisy’s Lemonade Stand and Lemon Shack in the above equation then the cost of operations should be same also.

This is only provided by C.On Monday, Daisy’s Lemonade Stand and the Lemon Shack incurred identical costs to run their businesses.<answer>

Re: Manhattan_CR (On Monday, Daisy’s Lemonade Stand sold...) [#permalink]

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11 Aug 2010, 22:24

Financier wrote:

On Monday, Daisy’s Lemonade Stand sold lemonade at 20 cents per cup. The Lemon Shack sold lemonade at 30 cents per cup. At the end of the day, Daisy’s Lemonade Stand and the Lemon Shack reported identical revenues and identical profits.

The statements above best support which of the following assertions?

A.On Monday, Daisy’s Lemonade Stand sold fewer cups of lemonade than did the Lemon Shack. B.The Lemon Shack sells higher quality lemonade than does Daisy’s Lemonade Stand. C.On Monday, Daisy’s Lemonade Stand and the Lemon Shack incurred identical costs to run their businesses. D.In general, lemonade consumers prefer the lemonade at Daisy’s Lemonade Stand to the Lemonade at the Lemon Shack. E.The Lemon Shack would not increase its revenues by lowering its prices.

Nice one. IMO C. Since Costs(expenses) = Revenues-Profits, and since the costs were identical for both stands the answer automatically converges towards C. Another point to note here is the argument mentions the situation for Monday only so it becomes more likely that the assertion for the argument would be based on what concludes on Monday and would seldom be a generic one.

Re: Manhattan_CR (On Monday, Daisy’s Lemonade Stand sold...) [#permalink]

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12 Aug 2010, 06:06

between C and D .. C is better ...as it is indorectly given in the question itself ... however D would be a slighlty exaggerated assertion regarding consumer liking

Re: Manhattan_CR (On Monday, Daisy’s Lemonade Stand sold...) [#permalink]

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12 Aug 2010, 17:19

More cups Daysy's lemonade were sold, so it was more in demand among the consumers. And it was more in demand, probably for many reasons, one of them could be a lower price compared to lemonade shacks.

Re: Manhattan_CR (On Monday, Daisy’s Lemonade Stand sold...) [#permalink]

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12 Aug 2010, 22:59

rlevochkin wrote:

More cups Daysy's lemonade were sold, so it was more in demand among the consumers. And it was more in demand, probably for many reasons, one of them could be a lower price compared to lemonade shacks.

Re: Manhattan_CR (On Monday, Daisy’s Lemonade Stand sold...) [#permalink]

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14 Aug 2010, 06:08

IMO D

C.On Monday, Daisy’s Lemonade Stand and the Lemon Shack incurred identical costs to run their businesses.

I believe C means that Daisy and Shack had similar input costs to run their business. But this should not be true. As Shack's price > Daisy's price, so Shack mush have reached the profit value by selling less than daisy.

Re: On Monday, Daisy s Lemonade Stand sold lemonade at 20 cents [#permalink]

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28 Dec 2012, 16:28

Experts,

Isn't this question ill-framed and vague.

Clearly D is a good answer choice

It's fair to assume that since customers prefer Daisy over Shack, Daisy would sell more cups. And since Daisy sells at 20cents & Shack at 30cents, we need to show that daisy sold more to make the revenue equal.

Choice C can also be substantiated but is weaker as the costs being the same, and selling the same number of cups, Shack > Daisy.

Re: On Monday, Daisy s Lemonade Stand sold lemonade at 20 cents [#permalink]

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01 Oct 2014, 23:12

The passage gives information about Monday’s business at two lemonade stores. The question asks us to make an assertion, or conclusion, based on the information provided. The answer choice that requires no additional assumptions will be the correct answer.

(A) This conclusion is incorrect. If Daisy’s sells its lemonade at a lower price than the Lemon Shack, and if the stores reported identical revenues for the day, then Daisy’s sold more cups of lemonade than the Lemon Shack, not less.

(B) We know nothing about the quality of lemonade at either store.

(C) CORRECT. If the stores reported identical revenues and identical profits, the profit equation Profit = Revenue – Cost tells us that their costs must have been identical as well.

(D) We know nothing about the preferences of lemonade consumers.

(E) We know nothing about the market conditions surrounding either store. Therefore, we cannot make any conclusions about what might happen if the Lemon Shack were to lower its prices. It is very possible that the Lemon Shack could in fact sell many more cups per day at lower prices, and it’s possible this could lead to higher revenues. _________________

Consider +1 Kudos Please

gmatclubot

Re: On Monday, Daisy s Lemonade Stand sold lemonade at 20 cents
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01 Oct 2014, 23:12

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