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18 Dec 2010, 09:39
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C
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
55%
(hard)
Question Stats:
64% (02:02) correct
36%
(01:27)
wrong
based on 11
sessions
History
Date
Time
Result
Not Attempted Yet
Hi, i run into this outwardly simple question while doing my CAT at Manhattan GMAT and OA really surprised me 
. I would appreciate your discussion.
On Monday, Daisy’s Lemonade Stand sold lemonade at 20 cents per cup. The Lemon Shack sold lemonade at 30 cents per cup. At the end of the day, Daisy’s Lemonade Stand and the Lemon Shack reported identical revenues and identical profits.
The statements above best support which of the following assertions?
(A) On Monday, Daisy’s Lemonade Stand sold fewer cups of lemonade than did the Lemon Shack.
(B) The Lemon Shack sells higher quality lemonade than does Daisy’s Lemonade Stand.
(C) On Monday, Daisy’s Lemonade Stand and the Lemon Shack incurred identical costs to run their businesses.
(D) In general, lemonade consumers prefer the lemonade at Daisy’s Lemonade Stand to the Lemonade at the Lemon Shack.
(E) The Lemon Shack would not increase its revenues by lowering its prices.
. I would appreciate your discussion.On Monday, Daisy’s Lemonade Stand sold lemonade at 20 cents per cup. The Lemon Shack sold lemonade at 30 cents per cup. At the end of the day, Daisy’s Lemonade Stand and the Lemon Shack reported identical revenues and identical profits.
The statements above best support which of the following assertions?
(A) On Monday, Daisy’s Lemonade Stand sold fewer cups of lemonade than did the Lemon Shack.
(B) The Lemon Shack sells higher quality lemonade than does Daisy’s Lemonade Stand.
(C) On Monday, Daisy’s Lemonade Stand and the Lemon Shack incurred identical costs to run their businesses.
(D) In general, lemonade consumers prefer the lemonade at Daisy’s Lemonade Stand to the Lemonade at the Lemon Shack.
(E) The Lemon Shack would not increase its revenues by lowering its prices.
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18 Dec 2010, 12:37
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daryayurlova
. I would appreciate your discussion.Hi!
When we're asked to find an answer supported by the statements above, we have an inference question. The correct answer to an inference question is something that MUST be true based on one or more of the statements in the stimulus.
When we untangle the stimulus, we simply paraphrase what we're told. Inference stimuli aren't arguments, they're just loose collections of facts, so we don't worry about evidence/conclusion/assumption as we do on assumption family (i.e. weaken/strengthen/assumption/flaw) questions.
So, to summarize:
2 stands, different prices. Same revenues and profits.
Now, on most inference questions it's very difficult to predict the correct answer (since on the basis of a number of facts you can usually draw numerous conclusions). However, when math is involved, sometimes a conclusion jumps out at you.
In this question, for example, we may immediately think "different prices, same revenues - therefore the cheaper stand (Daisy's) must have sold more lemonade".
Even when an inference jumps out, however, we sometimes get a surprise - in this case, that doesn't appear among the choices. So, we need to evaluate each statement and ask "is this something that MUST be true"?
A) the opposite of our prediction - MUST BE FALSE - eliminate.
B) no info about quality - outside the scope - eliminate.
C) we have info about revenue and profits, so this one has some potential. Referencing the basic profit equation:
profit = total revenue - total cost
we quickly see that if both stands generated the same revenue and had the same profits, they did indeed have the same total costs. C MUST be true - choose C!
On test day you should stop right here - no need to go any further. However, let's go into "review mode" and take a peek at D and E.
D) no info on preferences - outside the scope - eliminate D.
E) no info on the economics of the lemonade business - outside the scope - eliminate E.
Anything "outside the scope" COULD be true, but that's not good enough!
18 Dec 2010, 13:20
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skovinsky
Yeah i understand the reasoning behind the right answer but when i first saw C answer choice i thought - Daisy’s Lemonade Stand must have sold more cups of lemonade than Lemon Shack Stand to balance the price difference and when you sell larger number of goods higher costs are involved so C can no be the asnwer. So i went for D which was wrong.
