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The Scorpio Miser with its special high-efficiency engine [#permalink]
14 Sep 2004, 13:02
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15. 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 drops, 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 .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 decline , investors interested in a reliable income should choose bonds.
New Miser - fuel efficient engine - but costly
Savings on fuel over 60K miles make it a good buy.
=> if fuel prices fall MORE miles need to be added. However the stimulus states fewer miles is enough and is the flaw.
A. has a similar logical flaw
Given: Annual rate of earnings = Annual rate of interest - Inflation drop points.
assuming some numbers we have 5 = 6-1. If 1 become 2 (2 point drop, i.e addl one point drop in inflation), and 6 becomes 5 (dropping by the same one point) we are told that Annual rate of earnings will remain at 5. However, we see that 5-2 =3. Hence A.