The balance of a trader weighs 10% less than it should. Still the trader marks up his goods to get an overall profit of 20%. What is the mark up on the cost price?
Bad wording. I think the markup is 20% as mentioned in the stem.
OR, the question should say;
What is the mark up on the SUPPOSED cost price as Karishma mentioned.
Either way; bad question.
I guess if many people are troubled by the wording, it must be one of those questions where the wording implies different things depending on your background. I wouldn't worry about such a question.
That said, defective balance/weight questions are often worded in one of these ways:
1. The 1 kg weight weighs 10% less. (Here the weight is the metal piece which is supposed to weigh a kg and is put on one pan of the beam balance. So the product you want to buy is in the other pan and you will get only 900 gms though you will pay for 1 kg)
2. The balance weighs 10% less than it should. I think of a spring balance here. It displays 1 kg but weighs only 900 gms of the product.
3. The balance reads 10% more than what it weighs. Here, if the product is 100 gms, the balance reads 110 gms and you pay for 110 gms.
Also, marked price is always on what is visible to all. The defect in the balance is an anomaly and leads to extra profit for the trader. Otherwise, when he marks up, he does that on what the balance reads.
But as I said, if you have learned it differently, don't worry. In GMAT, it will be very clear what the intended meaning is.