jayids123 wrote:
I'm not sure I understand why E is wrong here.
My train of thought is as follows:
If the controlled harvesting increases the impact of erosion then net income would fall because GFC would have additional expenses (dredging, more new facilities).
So by saying that the controlled harvesting does not impact erosion we know that costs are flat, but revenue is increasing, so net income would be increasing.
I picked answer (E).
I have two issues with answer (D) that I am struggling to understand.
1) How do we know that GFC even has a fishing operation? Just because of its name? That seems like a big assumption to make. It's not implausible to name a business something outside of the realm of its primary income source.
2) How do we know that increasing fish populations would increase net income? We don't know anything about the business of fishing. How do we know that fishing would have a positive margin and thus increased fishing would grow net income? Seems like a big assumption to make.
With (E) we know that revenue is increasing, and also that one form of cost is staying flat, so net income would be more likely to increase. Could someone help explain what is wrong with my train of thought?
Also, the OA says that option (E) is incorrect because we do not know the effect that coastal erosion has on GFC's net income. However the stem states that it has added additional costs for GFC for dredging and new facilities. Seems like those are direct expenses from coastal erosion that are lowering net income.
GMATNinjaFirst, let’s take a look at (E):
Quote:
E. A controlled harvesting of mangrove wood by the GFC would have little effect on coastal erosion.
The problem with (E) is that while it gives us SOME reason to believe that coastal erosion won’t get worse with the new plan, it does little to strengthen the idea that Gacha’s net income will increase. Sure, Gocha isn’t going to incur additional costs from dredging. But we still don’t have reason to believe that the overall plan will INCREASE net income.
Moreover, (E) doesn’t tell us that the plan will have NO effect on coastal erosion. It tells us that the plan will have LITTLE effect on coastal erosion. But it’s possible that a small negative effect on coastal erosion will cause a large reduction in fish populations, thus hurting GFC’s bottom line. (E) simply leaves too much room for speculation, so we can eliminate it.
We covered (D) in
our previous post, but we’ll address your two questions here.
First, it’s fair to assume that a fishing cooperative is involved in fishing. A cooperative, by definition, is “a farm, business, or other organization which is owned and run jointly by its members, who share the profits or benefits.” It’s not a big assumption to conclude that a fishing cooperative’s main business is fish.
Second, it must be the case that fishing has a positive margin. Otherwise, the fishing cooperative would have gone out of business and ceased to exist. Therefore, if fish are more abundant, more fish are likely to be caught and sold, increasing GFC’s net income. Even if GFC chooses not to catch more fish (which would be strange for a fishing company), it’s likely that the increased number of fish in the sea would make it easier to catch fish and decrease GFC’s cost.
For those reasons, (D) strengthens the argument and is the best answer choice.
I hope that helps!