Harley1980 wrote:
McCray's Dairy Industries stands to reap tremendous profits in the coming year. The new milking apparatus and packing equipment purchased and installed last year allows McCray's to produce the same quantity of dairy products at less than one third of the previous cost. Restaurants and academic institutions throughout the state will choose to purchase all their dairy products from McCray's, because they will be available at a much lower cost than similar products from rival producers.
The argument above assumes which of the following?
A) Statewide demand for dairy products will increase substantially in the coming year
B) Buyers at restaurants and academic institutions throughout the state would prefer McCray's dairy products over rival dairy products if cost were no object
C) Physicians see no reason to predict a sharp increase in the number of dairy allergies throughout the state.
D) Statewide production of dairy products will not increase in the coming year.
E) The quality of McCray's dairy products meets the acceptability standards of most restaurants and academic institutions throughout the state.
Dear
Harley1980,
I'm happy to answer.
It's always fun to discuss a question I wrote.
This is an assumption question, and it lends itself well to the negation test. See:
https://magoosh.com/gmat/2013/assumption ... -the-gmat/If we negate the answer choice, will the argument still work?
Negation of (A):
Statewide demand for dairy products will not increase substantially in the coming year. OK, maybe this means that its stays the same or increases only slightly. Even if things stay the same, if McCray's dairy is far cheaper than the diary of its rivals, McCray could still make a big profit. Negating this doesn't destroy the argument, so this is not an assumption.
Negation of (B):
Buyers at restaurants and academic institutions throughout the state would prefer rival dairy products over McCray's dairy products if cost were no objectLet's call the rival Milky's. Suppose that, if both product were the same price, most institutional buyer and restaurant buyers would buy Milky's. Suppose that's true. Now, McCray starts using this now machine, and the cost of McCray goes down considerably. Now, cost
is an object! Now, perhaps fine restaurants would always buy the best ingredients, regardless of cost, but ordinary restaurants & schools & hospitals & other institutions often have severe budget constraints, and if one product is much cheaper, even if it is marginally worse, that is the product that will be bought. McCray's could still make a great deal of money in this scenario. Negating this doesn't destroy the argument, so this is not an assumption.
Negation of (C):
Physicians have some reason to predict a sharp increase in the number of dairy allergies throughout the state.Hmm. Well, first, the fact that some group of doctors feel that they have reason to predict some scenario of doom does NOT guarantee that it will happen. Modern culture is absolutely saturated with predictions of doom that go nowhere! So, first of all, just because it's predicted, it may or may not happen, in which case, it doesn't impact McCray's at all.
If there is a sharp increase in the number of dairy allergies throughout the state, well, that's a problem for all dairy manufacturers, but a dairy manufacturer that cut its prices, as McCray's had planned, would be situation to clean up in the reduced market, possibly driving rivals out of business. So, even this scenario, while not as rosy, would still benefit McCray's. Negating this doesn't destroy the argument, so this is not an assumption.
Negation of (D):
Statewide production of dairy products will increase in the coming year.Hmm. Supply increases. According to the
Law of Supply and Demand, this will drive price down. For many manufacturers, with fixed costs, this may be a problem. But if McCray's was planning to lower their price already, they would be in good shape. In fact, this condition may drive rivals out of business, which would be even better for McCray's. Negating this doesn't destroy the argument, so this is not an assumption.
Negation of (E):
The quality of McCray's dairy products does not meet the acceptability standards of most restaurants and academic institutions throughout the state.Uh-oh. This is a BIG problem for McCray's. If McCray's dairy products are below standards, then even if there price decreases, they may not make much more money, because they can't sell to many institutions. Institutions will tend to buy a cheaper product, but many institutions that serve food, especially schools and hospitals, are bound by strict state laws about food quality, if if something is not acceptable according to these laws, the institutions legally are not allowed to touch it, regardless of how affordably it may be priced. McCray will not make big profits in this case. This shatters the argument. Since negating this has a devastating effect on the argument, this must be an assumption.
OA =
(E)Does all this make sense?
Mike