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The Scorpio Miser with its special high-efficiency engine [#permalink]
18 Jan 2009, 16:18

00:00

A

B

C

D

E

Difficulty:

(N/A)

Question Stats:

25% (00:00) correct
75% (02:43) wrong based on 4 sessions

The Scorpio Miser with its special high-efficiency engine costs more to buy than the standard Scorpio sports car. At current fuel prices, a buyer choosing the Miser would have to drive it 60,000 miles to make up the difference in purchase price through savings on fuel. It follows that, if fuel prices fell, it would take fewer miles to reach the break-even point. Which one of the following arguments contains an error of reasoning similar to that in the argument above?

(A) The true annual rate of earnings on an interest-bearing account is the annual rate of interest less the annual rate of inflation. Consequently, if the rate of inflation drips, the rate of interest can be reduced by an equal amount without there being a change in the true rate of earnings.

(B) For retail food stores, the Polar freezer, unlike the Arctic freezer, provides a consistent temperature that allows the store to carry premium frozen foods. Thus, if electricity rates fell, a lower volume of premium-food sales could justify choosing the Polar freezer.

(C) With the Roadmaker, a crew can repave a mile of decayed road in less time than with the competing model, which is, however, much less expensive. Reduced staffing levels made possible by the Roadmaker eventually compensate for its higher price. Therefore, the Roadmaker is especially advantageous where average wages are low.

(D) The improve strain the Northland apple tree bears fruit younger and lives longer than the standard strain. The standard strain does grow larger at maturity, but to allow for this, standard trees must be spaced farther apart. Therefore, new plantings should all be of the improved strain.

(E) Stocks pay dividends, which vary from year to year depending on profits made. Bonds pay interest, which remains constant from year to year. Therefore, since the interest earned on bonds does not decrease when economic conditions decline, investors interested in a reliable income should choose bonds.

The Scorpio Miser with its special high-efficiency engine costs more to buy than the standard Scorpio sports car. At current fuel prices, a buyer choosing the Miser would have to drive it 60,000 miles to make up the difference in purchase price through savings on fuel. It follows that, if fuel prices fell, it would take fewer miles to reach the break-even point. Which one of the following arguments contains an error of reasoning similar to that in the argument above?

(A) The true annual rate of earnings on an interest-bearing account is the annual rate of interest less the annual rate of inflation. Consequently, if the rate of inflation drips, the rate of interest can be reduced by an equal amount without there being a change in the true rate of earnings.

(B) For retail food stores, the Polar freezer, unlike the Arctic freezer, provides a consistent temperature that allows the store to carry premium frozen foods. Thus, if electricity rates fell, a lower volume of premium-food sales could justify choosing the Polar freezer.

(C) With the Roadmaker, a crew can repave a mile of decayed road in less time than with the competing model, which is, however, much less expensive. Reduced staffing levels made possible by the Roadmaker eventually compensate for its higher price. Therefore, the Roadmaker is especially advantageous where average wages are low.

(D) The improve strain the Northland apple tree bears fruit younger and lives longer than the standard strain. The standard strain does grow larger at maturity, but to allow for this, standard trees must be spaced farther apart. Therefore, new plantings should all be of the improved strain.

(E) Stocks pay dividends, which vary from year to year depending on profits made. Bonds pay interest, which remains constant from year to year. Therefore, since the interest earned on bonds does not decrease when economic conditions decline, investors interested in a reliable income should choose bonds.

C

1. In the original arg.: The preference for one side (Miser) is based on the savings on fuel. 2. So, A and E out; A and E do not say the comparison 3. B out; B does not link the temperature and the electricity rates. 4. C has the same error as B, C out

The Scorpio Miser with its special high-efficiency engine costs more to buy than the standard Scorpio sports car. At current fuel prices, a buyer choosing the Miser would have to drive it 60,000 miles to make up the difference in purchase price through savings on fuel. It follows that, if fuel prices fell, it would take fewer miles to reach the break-even point. Which one of the following arguments contains an error of reasoning similar to that in the argument above? C

I will go for C.

The reasoning here is,

we have something that costs more than its competitor but is efficient in some other aspect( call it X). If we go for that something it takes certain time to realise its profit. But if the cost of the factor on which something's efficiency is based(i.e X) reduces we can have profits in shorter timeframe.

Or in short, something is beneficial when X is low.

The Scorpio Miser with its special high-efficiency engine costs more to buy than the standard Scorpio sports car. At current fuel prices, a buyer choosing the Miser would have to drive it 60,000 miles to make up the difference in purchase price through savings on fuel. It follows that, if fuel prices fell, it would take fewer miles to reach the break-even point. Which one of the following arguments contains an error of reasoning similar to that in the argument above? C

I will go for C.

The reasoning here is,

we have something that costs more than its competitor but is efficient in some other aspect( call it X). If we go for that something it takes certain time to realise its profit. But if the cost of the factor on which something's efficiency is based(i.e X) reduces we can have profits in shorter timeframe.

Or in short, something is beneficial when X is low.

great explanation alpha_plus_gama. I chose a wrong answer but your explanation made it clear for me.

Hope I don't get this type of questions in the exam. Which material you read to solve this type of questions? I am sure you can ace gmat CR if you able to solve this level difficulty questions..

The answer should be C . Because C mimics the same logical flaw present in the question stem.

“The Scorpio Miser with its special high-efficiency engine costs more to buy than the standard Scorpio sports car. At current fuel prices, a buyer choosing the Miser would have to drive it 60,000 miles to make up the difference in purchase price through savings on fuel. It follows that, if fuel prices fell, it would take fewer miles to reach the break-even point.”

Miser will give better milage than Sports , ie. per mile running cost is lower in Miser. It will make up the price difference through saving on fuel.

Now, Lets assume Miser runs 10 mile/ liter and Sport runs 8 mile/ liter. Fuel price is $10 / liter . Total distance covered by the cars is 80 mile. In this case, fuel cost in Miser is $ 80 and fuel cost of Sport is $100. Miser is saving $20 over Sports in a 80 km drive

2nd Scenario, with reduced fuel price: Lets assume the fuel price is $5 / liter. Total distance covered by the cars is 80 mile. Miser runs 10 mile/ liter and Sport runs 8 mile/ liter. In this case, fuel cost in Miser is $ 40 and fuel cost of Sport is $50. Miser is saving $10 over Sports in a 80 km drive.

Hence, in case of reduced fuel price, Fuel Savings is lower. In other words, if the fuel price is lower it would take MORE ( not fewer) miles to reach the break even point.

Similarly, In C, Roadmaker is especially advantageous when the average wages are HIGH. Low wage means low saving over its competitor. In that case costlier machine is not justified.

Originally posted on MIT Sloan School of Management : We are busy putting the final touches on our application. We plan to have it go live by July 15...