Re: Company X sold more products last year than it ever had before.
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02 Mar 2024, 20:15
OFFICIAL EXPLANATION
Company X sold more products last year than it ever had before. However, Company X's profit last year was smaller than ever before.
Which of the following, if true, would most contribute to an explanation of the facts above?
A. The prices of the products sold by Company X last year were higher than ever before.
Incorrect.
This is a Paradox question, so it is made up of premises only; you need to find a new premise which best resolves the apparent discrepancy between the existing premises:
Premise A: company X sold more products last year than it ever had before
✖
Premise B: company X's profit last year was smaller than ever before
Resolving Premise: ?
This argument includes two of three parameters of the profit formula - revenues and profit. Therefore, it is likely that the correct answer choice will in some way deal with the third parameter - expenses.
This answer emphasizes the paradox instead of resolving it. Not only did the company sell more products, it also sold them at high prices. This means high revenues, which would lead us to expect a bigger profit, not a smaller one.
B. A new company, Company Y, entered the market and became a competitor of Company X.
Incorrect.
This answer choice does not explain why, despite the rise in revenues, Company X made less money (smaller profit). It may be argued that Company Y drove Company X to lower its prices through competition, but this is not stated in the answer choice and therefore requires too many assumptions.
There's a better answer choice which resolves this paradox more directly. Look for it!
C. Two years ago, Company X's profit was double its profit from last year.
Incorrect.
This answer choice emphasizes the paradox by validating premise B. In other words, "Tell us something we don't know!". It is obvious that if last year's profits were smaller than ever before, then previous years' profits were larger. So actually, the information contained in this answer choice is useless.
D. Last year, the expenses of Company X were much higher than ever before.
Take a look at the formula for this type of question: Profit = revenues - expenses.
The argument tells us that Company X's revenues have risen (sold more products than ever before) but that its profit has decreased. If revenues have risen and profits have decreased, then the only way to explain this is that expenses have risen as well. This answer choice says just that.
E. Two years ago, Company X sold fewer products than it did last year.
Incorrect.
This is a Paradox question, so it is made up of premises only; you need to find a new premise which best resolves the apparent discrepancy between the existing premises:
Premise A: company X sold more products last year than it ever had before
✖
Premise B: company X's profit last year was smaller than ever before
Resolving Premise: ?
This argument includes two of three parameters of the profit formula - revenues and profit. Therefore, it is likely that the correct answer choice will in some way deal with the third parameter - expenses.
This answer choice emphasizes the paradox by further validating premise A. In other words, "Tell us something we don't know!". It is obvious that if more products were sold last year than ever before, then in previous years fewer products were sold. So actually, the data presented by this answer choice is useless.
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