A certain telephone company practices "peakload

Question

A certain telephone company practices "peakload pricing", wherein it charges more per minute of usage during limited peak hours than during non-peak hours. However, the revenues generated by telephone calls made during non-peak hours is much greater than that generated by calls made during peak hours.

Which of the following, if true, would most effectively resolve the apparent discrepancy in the arguement above?

(A)The average length of a telephonic call made during non peak hours is greater than that of those made during peak hours.
(B)The company billed customers for more minutes of non-peak hour conversation than minutes of peak hour conversation
(C)The higher rate of peak-hour calls more than compensates for the fewer minutes of peak-hour conversation
(D)The average cost to the telephone company of a peak minute of conversation exceeds the average cost to the telephone company of a non peak minute
(E)The total number of non-peak hour phone calls exceeds the total number of peak hour phone calls.

surbab · Answer

The answer is A.

When the length of the call of the non peak hour increases the revenue increases.

wudy · Answer

Vote A <img src="{SMILIES_PATH}/icon_rolleyes.gif" alt=":roll:" title="Rolling Eyes" />

ncp · Answer

This is a common trap in GMAT and unfortunately many of us fall for it so often.

Revenue = Duration * Rate per unit duration.

Further, duration = average length of call * no of calls.

As you can see, neither no of calls nor the length of the call by themself can account for the revenue.

Thus E and A are out. D is out because we are talking about revenues. So expenses do not matter.

Out of C and B, B is the correct answer because it satisfies our equation above and logically explains how the revenues could be higher inspite of the lower rate.

vineetgupta · Answer

Hi ncprasad,lets go by ur choice.
Peak hour call: P
Non peak hour call : NP

Now,
let cost/min for P be 2$ and cost/min for NP be 1$.

if the no of minutes for NP is 15
and for P is 10 min

So,even if no of min for NP > P
revenue by P ie 20$ is greater than that by P ie15$

That means B is wrong.

I think its A.

ng · Answer

A. it is

ncp · Answer

Lets do plain math.

Revenue R = Total no of minutes (M) * Rate per min (P)

So we have R=M*P

Now, M = No.of calls (N) * Average Length per call (L)

So we have R=N*L*P

The revenue is a product of 3 variables. We are told that inspite of the value of P being less, R is more. This means that N*L is more.

In some cases, this can be because N was more with constant or lesser L. In other cases, this can because L was more with constant or lesser N.

But in every case, there R is greater inspite of lower P, N*L will be greater.

In some cases, R can even be less with higher N*L because the difference in P is more significant (Your example above). Note that B account for this by saying that the company billed FAR more NP hours.

I still stick to B and would wait for the OA and OE.

mm007 · Answer

no, it is B... prasad's answer is correct...

here is the logic...

A says that avg call duration is higher for nonpeak calls...

but revenue = price ($/min) * total call time..

total call time can be less, even though the avg is higher for non-peak calls... 

e.g. take the example of 

4 np calls: 10 10 10 10, = total 40, avg = 10

100 p calls, 1, 1, 1, 1, 1, 1, 1, 1, 1, 1...., total =100, avg = 1

u would think np will give you more revenue.. tell me which gives more even if the price per min call is same for both p an np?

so A can't be the answer... 

same is the problem with E.. total number of calls can be more, but still the total call time can be less... 

B is the only answer which helps....

nitinneha · Answer

OA is B guys. 

There is no OE.

vineetgupta · Answer

Thanks ncprasad for the explanation...B it is.

javed · Answer

At frist, both A & B seems correct . But when you look closely then they both can be wrong and the only choice that explains the descrepancy in the statement is answere choice B.

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A certain telephone company practices "peakload

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