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V02#23

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Manager
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Status: Waiting to hear from University of Texas at Austin
Joined: 24 May 2010
Posts: 76
Location: Changchun, China
Schools: University of Texas at Austin, Michigan State
Followers: 5

Kudos [?]: 39 [0], given: 4

V02#23 [#permalink] New post 04 Jul 2010, 08:07
A small orchard specializing in citrus fruits has been receiving fewer orders for oranges in the off season. Orchard owners expect demand to pick up in the coming weeks as harvest begins, but they are concerned about a neighboring orchard nearly three times their size. The neighboring orchard has announced plans to sell cases of oranges for 20% less than regular price in order to jump-start the season by attracting new business.

Which of the following, if true, points to the most serious flaw of the small orchard's plan to attract business by matching the prices of the competing orchard?

(C) 2008 GMAT Club - v02#23

A The small orchard has a dozen customers under contract to purchase the first oranges of the season and may anger them by not extending the discount to them.
B The small orchard does not have time to advertise its oranges at lower prices.
C The small orchard will reduce the number of oranges in each case to minimize losses incurred by matching prices.
D The large orchard has a larger inventory and is more able to take losses on initially discounted oranges.
E The large orchard will target a different market than the small orchard.

I picked choice E.

My reasoning was that if the large orchard will target a different market then, the small orchard will give up profit unnecessarily. I pictured a large orchard selling thousands of oranges to food processor to make bottled orange juice, versus a small orchard producing for the local market.

The well known reasoning error to compare two unequals as equal.
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Manager
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Re: V02#23 [#permalink] New post 31 Jul 2010, 00:49
IMO D...

As per my understanding, E doesn't really help us in answering this question. If it targets a different market then there is no need to consider the large orchard at all in the first place.

At the same time, D suggests that since it has a bigger inventory available to it.. Say small has x number of oranges.. and large has 3x..
So once the small has sold x oranges, large orchard still has some left to cover up for the losses it incurred earlier.
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Re: V02#23   [#permalink] 31 Jul 2010, 00:49
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V02#23

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