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A new technique for extracting residues of oil from existing

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Status: Impossible is not a fact. It's an opinion. It's a dare. Impossible is nothing.
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A new technique for extracting residues of oil from existing  [#permalink]

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New post Updated on: 10 Mar 2018, 02:23
2
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A
B
C
D
E

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  75% (hard)

Question Stats:

59% (02:19) correct 41% (02:09) wrong based on 531 sessions

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A new technique for extracting residues of oil from existing oil wells by using lignins, a by-product of papermaking, is profitable provided that oil prices are over 20 dollars a barrel. Since oil prices are rising, investors looking for companies with prospects for rapid growth in profits would be wise to invest in paper manufacturers, whose currently almost worthless by-product will soon be a profit-boosting commodity.

Which of the following, if true, most seriously weakens the argument above?

(A) A small quantity of lignins are currently sold by paper manufacturers to chemical companies, but most of the lignins produced are burnt as waste.

(B) The 20-dollar-a-barrel oil price as a threshold of profitability for using lignins allows for the increased cost of refining crude oil that has been extracted using lignins.

(C) Only one-half to two-thirds of the total oil in a well can be extracted using conventional techniques of pumping and flooding with water.

(D) Petroleum-based substances that can be used as a substitute for lignins in extracting oil are costly and are made from oil, and these substances therefore increase in price as oil increases in price.

(E) The quantity of lignins produced annually in the manufacture of paper is several times larger than the amount that is likely to be useful in the oil industry.

Originally posted by nusmavrik on 18 Jun 2010, 10:17.
Last edited by broall on 10 Mar 2018, 02:23, edited 1 time in total.
Reformatted question, added OA
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Re: A new technique for extracting residues of oil from existing  [#permalink]

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New post 19 Jun 2010, 00:37
A new technique for extracting residues of oil from existing oil wells by using lignins, a by-product of papermaking, is profitable provided that oil prices are over 20 dollars a barrel. Since oil prices are rising, investors looking for companies with prospects for rapid growth in profits would be wise to invest in paper manufacturers, whose currently almost worthless by-product will soon be a profit-boosting commodity.

Which of the following, if true, most seriously weakens the argument above?
(A) A small quantity of lignins are currently sold by paper manufacturers to chemical companies, but most of the lignins produced are burnt as waste. -- strengthen,worthless/waste byproduct can used to refine oil

(B) The 20-dollar-a-barrel oil price as a threshold of profitability for using lignins allows for the increased cost of refining crude oil that has been extracted using lignins. increased costof refining crude oil using lignins. again profit. stenghten

(C) Only one-half to two-thirds of the total oil in a well can be extracted using conventional techniques of pumping and flooding with water. irrelevant - drawbacks of other techniques.


(D) Petroleum-based substances that can be used as a substitute for lignins in extracting oil are costly and are made from oil, and these substances therefore increase in price as oil increases in price. Costly petroleum-based substance cant be compared to worthless by-product.


(E) The quantity of lignins produced annually in the manufacture of paper is several times larger than the amount that is likely to be useful in the oil industry. larger than required, implies only some part is used which cant be profit boosting commodity.


correct me if am wrong.
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Re: A new technique for extracting residues of oil from existing  [#permalink]

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New post 26 Jul 2010, 20:38
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E it is...

I just began to realize a lot of the CR questions expect the test taker to know some supply and demand concepts. Not sure if the GMAC is tuning its test for business folks.
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Re: A new technique for extracting residues of oil from existing  [#permalink]

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New post 26 Jul 2010, 22:37
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nusmavrik wrote:
A new technique for extracting residues of oil from existing oil wells by using lignins, a by-product of papermaking, is profitable provided that oil prices are over 20 dollars a barrel. Since oil prices are rising, investors looking for companies with prospects for rapid growth in profits would be wise to invest in paper manufacturers, whose currently almost worthless by-product will soon be a profit-boosting commodity.


this argument can be easily narrowed down to B and E rest all are beyond the facts given in the argument.

B talks about rising cost, which need not essentially impact profitability. There4 B ruled out.

The scope of the argument is broadened from a new technique for extracting residues of oil, which is expected to be profitable if oil prices are 20$ a barrel(in premise) to investors looking to invest in paper manufacturing companies, whose worthless by-product will soon be a profit-boosting commodity(in conclusion). Thus there is a gap between the two. To weaken the argument we would need to attack the assumption. For example we could say profitability will be negatively impacted that if not as much of the new technique for extracting oil is significantly applied. Less demand in turn would affect the supply of Lignins. The by-product will soon be a nonprofit-boosting commodity. Consequently investors will not invest in paper manufacturing. E clarifies demand supply relation and attacks the assumption.
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Re: A new technique for extracting residues of oil from existing  [#permalink]

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New post 11 Oct 2018, 16:31
Please explain why E is the answer.
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A new technique for extracting residues of oil from existing  [#permalink]

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New post 11 Oct 2018, 17:14
siddharthfrancis - usually GMAT does not expect someone to have any prior knowledge of anything, but basic principles are required such as this case. if some product has a huge supply then it cost cant be high. gold has high price cause its supply is restricted. more over demand is very less. if demand would have been high then it can be a debatable topic.

So paper manufacturing cant be a profit-boosting commodity on the grounds that this by product will help someone to have huge profits. Let me know if it helps.
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Re: A new technique for extracting residues of oil from existing  [#permalink]

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New post 11 Oct 2018, 17:38
A is weakening the agreement by stating that the paper manufacturers rather than burning the excess byproduct might as well give it to the oil manufacturer for a similar cost, hence resulting in no drastic increase in the profit of the company. Though E is also weakening the agreement, A can not be neglected.
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Re: A new technique for extracting residues of oil from existing  [#permalink]

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New post 11 Oct 2018, 17:48
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HAPPYatHARVARD - problem with A is that it is talking on the lines of demand but not the supply. consider the situation of A but oil companies need a lot of this waste product then this story will be different. This is why A cant be the answer.
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Re: A new technique for extracting residues of oil from existing  [#permalink]

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New post 12 Oct 2018, 19:58
nightblade354 generis VeritasKarishma DavidTutorexamPAL GMATNinja

Can you validate my argument reasoning and PoE?

Quote:
A new technique for extracting residues of oil from existing oil wells by using lignins, a by-product of papermaking, is profitable provided that oil prices are over 20 dollars a barrel. Since oil prices are rising, investors looking for companies with prospects for rapid growth in profits would be wise to invest in paper manufacturers, whose currently almost worthless by-product will soon be a profit-boosting commodity.


Start with a conclusion in a weaken question.
Conclusion: Investors looking for better growth prospects in oil extraction
i.e. with more profitable margins shall be investing in paper manufacturers.

Premise:
A by-product of paper industry: lignin is more profitable to be used for oil extraction and
lignin is a worthless byproduct for paper industry.

Quote:
(A) A small quantity of lignins are currently sold by paper manufacturers to chemical companies, but most of the lignins produced are burnt as waste.

OK, so 1-5 % of lignin is sold to chemical companies by paper manufacturers and 80-90% is burned as waste.
So are we saying that the effective amount of lignin available for chemical companies itself is less.
If demand for lignin is more (higher profitability for oil exraction) and supply is less then cost of
purchase of lignin would go higher. Will not this weaken the argument? More cost paid to lignin
will compensate for the profits earned by using it for efficient oil extraction

Quote:
(B) The 20-dollar-a-barrel oil price as a threshold of profitability for using lignins allows for the increased cost of refining crude oil that has been extracted using lignins.

Totally irrelevant to the argument, This is like saying: the employees in a firm are not performing to their potential.
Well anyways the overall economy is bad, so even their efficient throughput will not help in more profits.

Quote:
(C) Only one-half to two-thirds of the total oil in a well can be extracted using conventional techniques of pumping and flooding with water.

Opposite ans, So I must use similar techniques as lignin to extract more oil.

Quote:
(D) Petroleum-based substances that can be used as a substitute for lignins in extracting oil are costly and are made from oil, and these substances therefore increase in price as oil increases in price.

Why oil prices increase is not my scope of argument at all.

Quote:
(E) The quantity of lignins produced annually in the manufacture of paper is several times larger than the amount that is likely to be useful in the oil industry.

Say paper manufacturers produce: 10 mT of lignin
Oil industry would use: 0.1 mT
I could not comprehend how would this weaken author's claim?
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Re: A new technique for extracting residues of oil from existing &nbs [#permalink] 12 Oct 2018, 19:58
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