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# Because competition has dramatically lowered margins in the industry,

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Manager
Joined: 15 Jun 2016
Posts: 78
Re: Because competition has dramatically lowered margins in the industry,  [#permalink]

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27 Sep 2017, 11:58
Expert,

Kindly explain,
Argument conclusion: If A then B
Inference: If not A, then not B.

Is it correct?
Magoosh GMAT Instructor
Joined: 28 Dec 2011
Posts: 4486
Re: Because competition has dramatically lowered margins in the industry,  [#permalink]

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27 Sep 2017, 22:04
1
VKat wrote:
Expert,

Kindly explain,
Argument conclusion: If A then B
Inference: If not A, then not B.

Is it correct?

Dear VKat

I'm happy to respond.

My friend, that's a classic logic mistake, not a proper inference. Think about it.
If an animal is a horse, then it is a mammal. = true
If an animal is not a horse, then it is not a mammal. = false (it could be a dog)

If a shape is a triangle, then it is a polygon. = true
If a shape is not a triangle, then it is not a polygon. = false (it could be a pentagon)

If I am in New York City, then I am in the USA. = true
If I am not in New York City, then I am not in the USA. = false (I could be in Chicago)

If the argument's conclusion is
If A, then B.
Then the following two are not valid conclusions
If not A, then not B (the inverse)
If B, then A (the converse)
But this transformation is a proper inference:
If not B, then not A. (the contrapositive)

It's a textbook logical mistake to start with an if-then statement and infer either the converse or the inverse. The GMAT will not ask you about these terms and will not test this stuff directly, but you need to understand not to fall into these errors.

Does all this make sense?
Mike
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Mike McGarry
Magoosh Test Prep

Education is not the filling of a pail, but the lighting of a fire. — William Butler Yeats (1865 – 1939)

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Joined: 15 Jun 2016
Posts: 78
Re: Because competition has dramatically lowered margins in the industry,  [#permalink]

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28 Sep 2017, 19:34
mikemcgarry wrote:
VKat wrote:
Expert,

Kindly explain,
Argument conclusion: If A then B
Inference: If not A, then not B.

Is it correct?

Dear VKat

I'm happy to respond.

My friend, that's a classic logic mistake, not a proper inference. Think about it.
If an animal is a horse, then it is a mammal. = true
If an animal is not a horse, then it is not a mammal. = false (it could be a dog)

If a shape is a triangle, then it is a polygon. = true
If a shape is not a triangle, then it is not a polygon. = false (it could be a pentagon)

If I am in New York City, then I am in the USA. = true
If I am not in New York City, then I am not in the USA. = false (I could be in Chicago)

If the argument's conclusion is
If A, then B.
Then the following two are not valid conclusions
If not A, then not B (the inverse)
If B, then A (the converse)
But this transformation is a proper inference:
If not B, then not A. (the contrapositive)

It's a textbook logical mistake to start with an if-then statement and infer either the converse or the inverse. The GMAT will not ask you about these terms and will not test this stuff directly, but you need to understand not to fall into these errors.

Does all this make sense?
Mike

Ya mike,
And i have also gone through the explanation which you have provided just above this post.
But i took a different route to solve this problem.

For me, A : If Euroquest cut expenditure by atleast 25%
B : it will remain solvent.

So as per your explanation, if not A, then not B is a wrong inference.
So how option B is correct which states that, If Euroquest cannot reduce its expenditure by atleast 25%, it will not remain solvent.

I hope you understood my point.
Magoosh GMAT Instructor
Joined: 28 Dec 2011
Posts: 4486
Re: Because competition has dramatically lowered margins in the industry,  [#permalink]

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30 Sep 2017, 12:51
1
VKat wrote:
Ya mike,
And i have also gone through the explanation which you have provided just above this post.
But i took a different route to solve this problem.

For me, A : If Euroquest cut expenditure by atleast 25%
B : it will remain solvent.

So as per your explanation, if not A, then not B is a wrong inference.
So how option B is correct which states that, If Euroquest cannot reduce its expenditure by atleast 25%, it will not remain solvent.

I hope you understood my point.

Dear VKat,

I'm happy to respond.

My friend, part of the problem here is that you translated a sentence in the prompt to an incorrect if-then statement.

The prompt said:
. . . Euroquest must reduce personnel expenditures by at least 15% over the next year in order to remain solvent.

This does NOT translate to
If Euroquest reduces personnel expenditures by at least 15% over the next year, then it will remain solvent.
That is a complete logical distortion of the original statement.

Consider these general statements:
A must be true in order for B to be true.
A is necessary for B.
These translate to
If B is true, then A is true.

Here, if we were going to translate the prompt sentence to an if-then form (not necessarily the best strategy!), the best translation would be something of this sort:
If Euroquest remains solvent over the next year, then it has reduced its personnel expenditures by at least 15% over that same period.
The contrapositive of this is:
If Euroquest does not reduce personnel expenditures by at least 15% over the next year, then it will not remain solvent.
Both of those statements have the same truth-content as the statement in the prompt.

Does all this make sense?
Mike
_________________

Mike McGarry
Magoosh Test Prep

Education is not the filling of a pail, but the lighting of a fire. — William Butler Yeats (1865 – 1939)

Senior Manager
Joined: 02 Apr 2014
Posts: 476
Location: India
Schools: XLRI"20
GMAT 1: 700 Q50 V34
GPA: 3.5
Re: Because competition has dramatically lowered margins in the industry,  [#permalink]

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26 Oct 2017, 00:47
Hi all,
Contrapositive works.

Premise: In order to do so, Euroquest would have to cut entire divisions and benefits programs such that it would reduce personnel expenditures by a full 25% over the next year

Remain solvent (A) -> reduce personnel expenditure by a full 25% (B)
ContraPositive: ~B -> ~A always true.
so, not reduce personnel expenditure by a full 25% (~B) -> won't remain solvent (~A)
But Reverse: B -> A (need not be true always)
i.e. reduce personnel expenditure by a full 25% (B) -> Remain solvent (A) (need not be true always)

Choice A: Exact reverse discussed above, Need not be true
Choice B: ContraPositive true.
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Joined: 26 Jun 2017
Posts: 415
Location: Russian Federation
Concentration: General Management, Strategy
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Re: Because competition has dramatically lowered margins in the industry,  [#permalink]

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05 Mar 2018, 02:29
TaN1213 wrote:
Because competition has dramatically lowered margins in the industry, Euroquest must reduce personnel expenditures by at least 15% over the next year in order to remain solvent. In order to do so, Euroquest would have to cut entire divisions and benefits programs such that it would reduce personnel expenditures by a full 25% over the next year.

Which of the following can be logically inferred from the information above?
a. Euroquest reduces personnel expenditures by 25% over the next year it will remain solvent.
b. If Euroquest cannot reduce personnel expenditures by 25% over the next year it will not remain solvent.
c. Euroquest is unable to charge as much for its products as it was a year ago.
d. Euroquest competitors earn a higher return on investment for personnel expenditures than Euroquest does.
e. Some of Euroquest competitors will also have to significantly reduce personnel expenditures in order to remain solvent.

It is a tough one.
But if to be very attentive, we can see that A is out. An b is the only suitable one.

C, D, E are outsiders.
C. It need not to be true. Euroquest may be able to charge as much as it was a year ago. But it can have so big personnel cost, so it is not able to remain solvent. Out.
D. Maybe. But we do not know it.
E. Maybe. But it does not matter to us.

A. Trap. must reduce personnel expenditures by at least 15% in order to remain solvent.
So, maybe 15% will not be enough. Maybe even 25% will not be enough. Maybe even 50% will not be enough. So out.

B. Hard to choose, but really it is the only one.
Look at the second sentence.
In order to do so, Euroquest would have to cut entire divisions and benefits programs such that it would reduce personnel expenditures by a full 25% over the next year.
It says that we can not reduce personnel cost by 15%. We have to initialize procedure that will cut our costs only by 25%.
So, if Euroquest does not do it, then it will not cut costs by 15% --------------> it will not remain solvent.
Manager
Joined: 12 Mar 2017
Posts: 232
Location: India
Concentration: Strategy, General Management
GMAT 1: 630 Q49 V27
GPA: 4
Re: Because competition has dramatically lowered margins in the industry,  [#permalink]

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18 Mar 2018, 02:03
abhimahna wrote:
rekhabishop wrote:
I am not very convinced with OA. Shouldn't the answer be A?

Okay, I solved this question after a couple of days now and realized my mistake.

The argument is saying two things:

1. To remain solvent, you need to reduce expenditure by atleast 15%.

2. To meet point 1, you need to cut some benefits by 25%.

That means if I donot reduce my benefits by 25%, I wont be able to meet my point 1. If I donot meet my point 1 , I will not be able to remain solvent.

Hence, B is a clear winner here.

rekhabishop , here is the catch. I am saying To do X, I need to Y. But it doesn't mean if I do Y, I will do X as well.

It's like

If P, then Q. But notice that If Q doesn't guarantee P. Hence, A is out without a second thought.

Does that make sense?

P.S: Thanks for tagging me in. I am able to do this question 2nd time very easily. First time, I didnt realize my mistake at all.

abhimahna
If my understanding is correct then, you have arrived at option B using the following reasoning

Acc to Option A: If I am able to reduce expenses by 25% then it's not necessary that I can avoid insolvency. It may happen or it may not happen
Acc to option B: If I am not able to reduce expenses by 25% then I definitely can't save myself from becoming insolvent

but I have another question. What if I reduce expenses by a value between 15-25%. Wont B fall apart as well?
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Re: Because competition has dramatically lowered margins in the industry,  [#permalink]

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18 Mar 2018, 07:58
prateek176 wrote:
If my understanding is correct then, you have arrived at option B using the following reasoning

Acc to Option A: If I am able to reduce expenses by 25% then it's not necessary that I can avoid insolvency. It may happen or it may not happen
Acc to option B: If I am not able to reduce expenses by 25% then I definitely can't save myself from becoming insolvent

but I have another question. What if I reduce expenses by a value between 15-25%. Wont B fall apart as well?

Hey prateek176 ,

Actually No.

See the argument itself is saying we need to reduce expenses by 25%. This doesn't open the doors for negotiation. So, if you are saying between 15 and 24.99%, it means you are not meeting the criteria of the argument itself.

Hence, B will fall apart only when the argument itself is saying so.

Does that make sense?
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Location: India
Concentration: Finance, General Management
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Re: Because competition has dramatically lowered margins in the industry,  [#permalink]

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20 Mar 2018, 09:06
TaN1213 wrote:
Because competition has dramatically lowered margins in the industry, Euroquest must reduce personnel expenditures by at least 15% over the next year in order to remain solvent. In order to do so, Euroquest would have to cut entire divisions and benefits programs such that it would reduce personnel expenditures by a full 25% over the next year.

Which of the following can be logically inferred from the information above?
a. Euroquest reduces personnel expenditures by 25% over the next year it will remain solvent.
b. If Euroquest cannot reduce personnel expenditures by 25% over the next year it will not remain solvent.
c. Euroquest is unable to charge as much for its products as it was a year ago.
d. Euroquest competitors earn a higher return on investment for personnel expenditures than Euroquest does.
e. Some of Euroquest competitors will also have to significantly reduce personnel expenditures in order to remain solvent.

Option A as well as Option B, Both seems correct, But Option B is definite one.
Intern
Joined: 19 Sep 2017
Posts: 39
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Re: Because competition has dramatically lowered margins in the industry,  [#permalink]

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14 Apr 2018, 14:57
TaN1213 wrote:
Because competition has dramatically lowered margins in the industry, Euroquest must reduce personnel expenditures by at least 15% over the next year in order to remain solvent. In order to do so, Euroquest would have to cut entire divisions and benefits programs such that it would reduce personnel expenditures by a full 25% over the next year.

Which of the following can be logically inferred from the information above?
a. Euroquest reduces personnel expenditures by 25% over the next year it will remain solvent.
b. If Euroquest cannot reduce personnel expenditures by 25% over the next year it will not remain solvent.
c. Euroquest is unable to charge as much for its products as it was a year ago.
d. Euroquest competitors earn a higher return on investment for personnel expenditures than Euroquest does.
e. Some of Euroquest competitors will also have to significantly reduce personnel expenditures in order to remain solvent.

Correct choice B

Thought process:
Necessary reduction to remain solvent — at least 15%
What Euroquest can do — 25%
How? Cut entire divisions and benefits programs.
Could it do partial? Not given.
So, only possible way to remain solvent is 25%. Hence Option B.
Intern
Joined: 29 Feb 2016
Posts: 4
Re: Because competition has dramatically lowered margins in the industry,  [#permalink]

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10 Jan 2019, 08:14
Hi Mike,
The reason why i chose A is because, I thought even if the company was unable to reduce personnel expenses by 25%, it does not mean it can not reduce expenses in some other area. So, I don't think not reducing personnel expenses by 25% is sufficient for the company to go bankrupt. Just like you mentioned there might be a sudden jump in the revenues, etc. Please help
Re: Because competition has dramatically lowered margins in the industry,   [#permalink] 10 Jan 2019, 08:14

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