Complaints that milk bottlers take enormous markups on the bottled mil

PriyankaPalit7

C states that bottlers take substantially greater markups on bottled milk when its price (i.e. the price of the bottled milk) is low is low for long periods of time. That's wrong for two reasons:

1. The argument speaks about the relation between bottlers' markups and the price for raw milk, not bottled milk.

2. It doesn't make really make sense logically if bottlers enjoy the greatest markups when the price for their product (bottled milk) is the lowest.

To further that..........

(C) mentions : markups on bottled milk when its price is low for an extended period than when it is high for an extended period.

Now the issue here is we must be least concerned about the duration of the Markup...

Rather , this is a must be True type question where our Primary focus must be finding out the Assumption and checking it....

We find (D) clearly is the assumption of the Arguement, if we negate this condition, the entire Arguement falls apart, check the condition using this option...

Hence (D) wins over (C)

Hi
Could someone pls explain why A and E are incorrect?

Hi Kriti

Option (A) states that consumers pay more for milk when raw-milk prices are falling than they do when the prices are rising. What we know for sure from the stimulus is the following:

"When the raw-milk price is rising, the bottlers’ markups are actually smallest proportionate to the retail price. When the raw-milk price is falling, however, the markups are greatest."

Therefore, the difference between the cost for the bottlers and the selling price of bottled milk as a proportion of the retail price is the metric that is high when prices are falling and low when prices are rising. The price that the consumers pay refers to the retail price of bottled milk. They are different metrics and what we know about one says nothing with certainty about the other. For example, consider the following scenario:

Cost of raw milk = 90
Retail price = 100
Markup = (100-90)/100 = 10% (I'm assuming no other costs, which, while inaccurate, serves the purpose here)

Cost of raw milk = 80 (Lower than earlier)
Retail price = 90 (Lower than earlier)
Markup = (90-80)/90 = 11.1% (Higher than earlier)

The above scenario is perfectly consistent with the stimulus, but inconsistent with option (A).

Option (E) states: "Consumers tend to complain more about the price they pay for bottled milk when dairy farmers are earning their smallest profits". This, however, is inconsistent (at best, inconclusive) with the information given in the stimulus, which states the following:

"Complaints that milk bottlers take enormous markups on the bottled milk sold to consumers are most likely to arise when least warranted by the actual spread..."

Therefore, the consumers' complaints are about the profits made by the bottlers and not about the actual price of milk. It is entirely plausible that the consumers might be understanding about the increase in prices but concerned about what they perceive to be increased profiteering by the bottlers. This scenario is consistent with the stimulus but inconsistent with Option (E).

Hope this helps.

Complaints that milk bottlers take enormous markups on the bottled milk sold to consumers are most likely to arise when least warranted by the actual spread between the price that bottlers pay for raw milk and the price at which they sell bottled milk. The complaints occur when the bottled-milk price rises, yet these price increases most often merely reflect the rising price of the raw milk that bottlers buy from dairy farmers. When the raw-milk price is rising, the bottlers’ markups are actually smallest proportionate to the retail price. When the raw-milk price is falling, however, the markups are greatest.

If all of the statements above are true, which one of the following must also be true on the basis of them?

My 2 cents:

1° Premise: Complaints that milk bottlers take enormous markups on the bottled milk sold to consumers are most likely to arise when least warranted by the actual spread between the price that bottlers pay for raw milk and the price at which they sell bottled milk
2° Premise: The complaints occur when the bottled-milk price rises, yet these price increases most often merely reflect the rising price of the raw milk that bottlers buy from dairy farmers. When the raw-milk price is rising, the bottlers’ markups are actually smallest proportionate to the retail price. When the raw-milk price is falling, however, the markups are greatest

So, consumers complaint about the enormous markups on the bottled milk sold...(read 1° Premise) and i know that the higher is the price of the raw milk, the less is the markup and viceversa. Thanks to this, i know that when the price of the raw milk is higher, the price of the bottled-milk rises, too. But when the price of the raw milk is lower, we can suppose, from the 2° Premise, that the price of the bottled-milk remains the same.

(D) Milk bottlers generally do not respond to a decrease in raw-milk prices by straightaway proportionately lowering the price of the bottled milk they sell. -> BINGO

Hope it helps

PS Sorry for my bad English

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