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01 Nov 2023, 01:30
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D
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
25%
(medium)
Question Stats:
81% (01:43) correct
19%
(01:45)
wrong
based on 298
sessions
History
Date
Time
Result
Not Attempted Yet
If the minimum wage increases again, MacDowell’s will have to increase the prices it charges for its products. And if that happens, MacDowell’s has a choice: it can spend more on advertising to attract more customers, or its sales and profitability will decrease. But since the extra advertising costs will simply raise total expenses, increasing those costs will still result in an overall decrease in profitability.
Which one of the following conclusions can be logically drawn from the statements above?
A. Unless the minimum wage increases, MacDowell’s will continue to remain profitable.
B. If the minimum wage increases, MacDowell’s will no longer be able to remain profitable.
C. MacDowell’s will see its profitability increase if the minimum wage does not increase.
D. MacDowell’s will be unable to maintain its current profitability if the minimum wage increases.
E. If MacDowell’s sees a reduction in its profitability, that means that the minimum wage has increased.
Which one of the following conclusions can be logically drawn from the statements above?
A. Unless the minimum wage increases, MacDowell’s will continue to remain profitable.
B. If the minimum wage increases, MacDowell’s will no longer be able to remain profitable.
C. MacDowell’s will see its profitability increase if the minimum wage does not increase.
D. MacDowell’s will be unable to maintain its current profitability if the minimum wage increases.
E. If MacDowell’s sees a reduction in its profitability, that means that the minimum wage has increased.
01 Nov 2023, 06:32
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Bunuel
OA IS D
Before wage hike :
Let us suppose that cost of making a product is $80.
Selling price is $100.
Net profit = $20
Profit percent = 20/80*100 = 25%
After wage hike:
Since the labour cost increased. Let us suppose the price of making a product is $100
Now new selling price = $120
But since the selling price increased, they have to invest in marketing.
Now let us suppose the marketing cost is $10
So total expense 110
Profit will decrease to $10.
Profit percent will also decrease.
Let us start option elimination
A. Unless the minimum wage increases, MacDowell’s will continue to remain profitable.- Now we don't know about the future what will happen after some time. It will continue to remain profitable we can't say for sure. So rejected.
B. If the minimum wage increases, MacDowell’s will no longer be able to remain profitable.
Now using the example, we can say that it's profit will decrease but saying it will not remain profitable is wrong, so rejected.
C. MacDowell’s will see its profitability increase if the minimum wage does not increase.
This can also be eliminated as there is nothing told about increase in profit, so rejected.
D. MacDowell’s will be unable to maintain its current profitability if the minimum wage increases.
This can we say for now, see the example the profitability will be there but it will decrease for sure that we can say. So this is our answer.
E. If MacDowell’s sees a reduction in its profitability, that means that the minimum wage has increased.
We can't say this the opposite can never be true. If profitability see reduction there can be many reasons for that. So we can reject this.
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02 Dec 2023, 03:30
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Bunuel
VERITAS PREP OFFICIAL SOLUTION:
Because this is an Inference question, the degree of proof for the correct answer is that the correct answer MUST BE TRUE. Because of that:
Choice A is incorrect because you're not told what happens if the minimum wage does not increase. This prediction is hard to make, then: suppose the minimum wage stayed flat but a disease was traced to MacDowell's ingredients or a fire burned down its top-grossing store. There are plenty of ways for profitability to be cut even if the minimum wage stays flat.
Choice B is incorrect because it goes too far. You know that profitability will decrease, but not that it will go away entirely.
Choice C is incorrect for similar reasons to choice A. There are plenty of factors aside from the minimum wage that could decrease profitability, so choice C is not necessarily true.
Choice D is correct. Because you're told in the argument that, of the two options that would face MacDowell's in the event of a minimum wage increase, both will decrease profitability, you know it to be true that a wage increase will cut profitability.
Choice E is incorrect for similar reasons to A and C. Plenty of other factors can lead to a decrease in profitability, so that decrease on its own does not allow you to infer that it was specific to a minimum wage hike.
