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Near Chicago a newly built hydroponic spinach “factory,”

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Near Chicago a newly built hydroponic spinach “factory,” [#permalink]

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Official Guide for GMAT Verbal Review, 2nd Edition

Practice Question
Question No.: 23
Page: 124
Difficulty:


Near Chicago a newly built hydroponic spinach “factory,” a completely controlled environment for growing spinach, produces on 1 acre of floor space what it takes 100 acres of fields to produce. Expenses, especially for electricity, are high, however, and the spinach produced costs about four times as much as washed California field spinach, the spinach commonly sold throughout the United States.

Which of the following, if true, best supports a projection that the spinach-growing facility near Chicago will be profitable?

(A) Once the operators of the facility are experienced, they will be able to cut operating expenses by about 25 percent.
(B) There is virtually no scope for any further reduction in the cost per pound for California field spinach.
(C) Unlike washed field spinach, the hydroponically grown spinach is untainted by any pesticides or herbicides and thus will sell at exceptionally high prices to such customers as health food restaurants.
(D) Since spinach is a crop that ships relatively well, the market for the hydroponically grown spinach is no more limited to the Chicago area than the market for California field spinach is to California.
(E) A second hydroponic facility is being built in Canada, taking advantage of inexpensive electricity and high vegetable prices.

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S

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Originally posted by WaterFlowsUp on 17 Sep 2013, 13:26.
Last edited by Narenn on 16 Oct 2013, 07:26, edited 1 time in total.
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Re: Near Chicago a newly built hydroponic spinach “factory,” [#permalink]

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New post 17 Sep 2013, 21:49
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WaterFlowsUp wrote:
Near Chicago a newly built hydroponic spinach
“factory,” a completely controlled environment for
growing spinach, produces on 1 acre of fl oor space
what it takes 100 acres of fi elds to produce.
Expenses, especially for electricity, are high, however,
and the spinach produced costs about four times as
much as washed California fi eld spinach, the spinach
commonly sold throughout the United States.
Which of the following, if true, best supports a
projection that the spinach-growing facility near
Chicago will be profi table?
(A) Once the operators of the facility are
experienced, they will be able to cut operating
expenses by about 25 percent.
(B) There is virtually no scope for any further
reduction in the cost per pound for California
field spinach.
(C) Unlike washed fi eld spinach, the hydroponically
grown spinach is untainted by any pesticides or
herbicides and thus will sell at exceptionally high
prices to such customers as health food
restaurants.
(D) Since spinach is a crop that ships relatively well,
the market for the hydroponically grown spinach
is no more limited to the Chicago area than the
market for California fi eld spinach is to
California.
(E) A second hydroponic facility is being built in
Canada, taking advantage of inexpensive
electricity and high vegetable prices.



We need to explain how spinach-growing facility near Chicago could be profitable. Note that the argument tells us that the production of factory spinach costs 4 times as much as field spinach. Say field spinach costs $1 per pack to produce and factory spinach costs $4 per pack to produce. To be profitable factory spinach will need to be sold at $5 per pack but field spinach can be easily sold at $1.50 per pack. So it seems that no one will buy the factory spinach because it will be way too expensive relative to the field spinach.

Also note that productivity per acre has no role to play here. We have been given that factory spinach production costs 4 time more. So it includes the cost of land and resources. When you sum it all up, you see that cost per packet for factory spinach is 4 times as much.

Let's look at the options now. We need one which can tell us why people may be willing to buy the much more expensive factory spinach.

(A) Once the operators of the facility are
experienced, they will be able to cut operating
expenses by about 25 percent.

A 25% cut and that too only in operating costs (not in the fixed costs) will have no meaningful effect. The cost of production might go down to $3.5 per pack. We will still need to sell it at a much higher cost that field spinach.

(B) There is virtually no scope for any further
reduction in the cost per pound for California
field spinach.

Out of scope. We don't even know if there is any scope of cost reduction in factory spinach. And even if there is, we don't know how much. Also scope of reduction and actual reduction are very different things.

(C) Unlike washed fi eld spinach, the hydroponically
grown spinach is untainted by any pesticides or
herbicides and thus will sell at exceptionally high
prices to such customers as health food
restaurants.

Now here is a reason why people may buy the $5 per pack spinach. This may mean that the factory may be profitable after all.

(D) Since spinach is a crop that ships relatively well,
the market for the hydroponically grown spinach
is no more limited to the Chicago area than the
market for California fi eld spinach is to
California.

The range of the market is not important. We can put the spinach in stores all across the world; the point is will people buy it?

(E) A second hydroponic facility is being built in
Canada, taking advantage of inexpensive
electricity and high vegetable prices.

Out of scope. We are worried about this factory only.

Answer (C)
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Re: Near Chicago a newly built hydroponic spinach “factory,” [#permalink]

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New post 19 Oct 2014, 12:01
Great question, I almost fell into the trap before I checked the question again. I was sure that C is the correct answer until I saw E, which looked pretty good as well, since it addresses both the expensive electricity prices and that the their spinach can be sold for high prices. Reading the question again saved me! (However, Chicago is not that far away from Canada though... :-D )
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Near Chicago a newly built hydroponic spinach “factory,” [#permalink]

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New post 23 Feb 2015, 14:15
It's a good question, fast got trapped on it.

The main point I was looking for was either to find an argument which says that the prices for hydroponic spinach are significantly higher than for field spinach, or there is a possibility to reduce costs significantly. Only two answer choices state something about prices or cost reductions fpr "Super" spinach, so I've shortlisted to A and C.

(A) Once the operators of the facility are experienced, they will be able to cut operating expenses by about 25 percent --> the cots for "super" Spinach are x4 higher, so -25% won't help to be profitable.
(C) Unlike washed field spinach, the hydroponically grown spinach is untainted by any pesticides or herbicides and thus will sell at exceptionally high prices to such customers as health food restaurants --> CORRECT. firstly thought that health food restaurants is a limited market etc. But just learned not to make so many assumptions and deep thinking for this question type. So we get much more $ from health restaurants - supports that this product will be profitable.
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Re: Near Chicago a newly built hydroponic spinach “factory,” [#permalink]

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New post 26 Mar 2016, 12:32
VeritasPrepKarishma wrote:
WaterFlowsUp wrote:
Near Chicago a newly built hydroponic spinach
“factory,” a completely controlled environment for
growing spinach, produces on 1 acre of fl oor space
what it takes 100 acres of fi elds to produce.
Expenses, especially for electricity, are high, however,
and the spinach produced costs about four times as
much as washed California fi eld spinach, the spinach
commonly sold throughout the United States.
Which of the following, if true, best supports a
projection that the spinach-growing facility near
Chicago will be profi table?
(A) Once the operators of the facility are
experienced, they will be able to cut operating
expenses by about 25 percent.
(B) There is virtually no scope for any further
reduction in the cost per pound for California
field spinach.
(C) Unlike washed fi eld spinach, the hydroponically
grown spinach is untainted by any pesticides or
herbicides and thus will sell at exceptionally high
prices to such customers as health food
restaurants.
(D) Since spinach is a crop that ships relatively well,
the market for the hydroponically grown spinach
is no more limited to the Chicago area than the
market for California fi eld spinach is to
California.
(E) A second hydroponic facility is being built in
Canada, taking advantage of inexpensive
electricity and high vegetable prices.



We need to explain how spinach-growing facility near Chicago could be profitable. Note that the argument tells us that the production of factory spinach costs 4 times as much as field spinach. Say field spinach costs $1 per pack to produce and factory spinach costs $4 per pack to produce. To be profitable factory spinach will need to be sold at $5 per pack but field spinach can be easily sold at $1.50 per pack. So it seems that no one will buy the factory spinach because it will be way too expensive relative to the field spinach.

Also note that productivity per acre has no role to play here. We have been given that factory spinach production costs 4 time more. So it includes the cost of land and resources. When you sum it all up, you see that cost per packet for factory spinach is 4 times as much.

Let's look at the options now. We need one which can tell us why people may be willing to buy the much more expensive factory spinach.

(A) Once the operators of the facility are
experienced, they will be able to cut operating
expenses by about 25 percent.

A 25% cut and that too only in operating costs (not in the fixed costs) will have no meaningful effect. The cost of production might go down to $3.5 per pack. We will still need to sell it at a much higher cost that field spinach.

(B) There is virtually no scope for any further
reduction in the cost per pound for California
field spinach.

Out of scope. We don't even know if there is any scope of cost reduction in factory spinach. And even if there is, we don't know how much. Also scope of reduction and actual reduction are very different things.

(C) Unlike washed fi eld spinach, the hydroponically
grown spinach is untainted by any pesticides or
herbicides and thus will sell at exceptionally high
prices to such customers as health food
restaurants.

Now here is a reason why people may buy the $5 per pack spinach. This may mean that the factory may be profitable after all.

(D) Since spinach is a crop that ships relatively well,
the market for the hydroponically grown spinach
is no more limited to the Chicago area than the
market for California fi eld spinach is to
California.

The range of the market is not important. We can put the spinach in stores all across the world; the point is will people buy it?

(E) A second hydroponic facility is being built in
Canada, taking advantage of inexpensive
electricity and high vegetable prices.

Out of scope. We are worried about this factory only.

Answer (C)



Hi Karishma,

Thank you for explaining it so well , just wanted to clarify one thing though, in the question is it spinach produced cost or spinach production cost ? . Although after deep analysis realized there is not much difference between the two , but anyhow I selected wrong answer keeping in mind that spinach produced cost 4x than field spinach.

Please help

Thanks
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Re: Near Chicago a newly built hydroponic spinach “factory,” [#permalink]

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New post 26 Mar 2016, 13:07
Megha , you are right .. the difference isn't significant
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Re: Near Chicago a newly built hydroponic spinach “factory,” [#permalink]

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New post 25 Jul 2016, 01:47
VeritasPrepKarishma wrote:
WaterFlowsUp wrote:
Near Chicago a newly built hydroponic spinach
“factory,” a completely controlled environment for
growing spinach, produces on 1 acre of fl oor space
what it takes 100 acres of fi elds to produce.
Expenses, especially for electricity, are high, however,
and the spinach produced costs about four times as
much as washed California fi eld spinach, the spinach
commonly sold throughout the United States.
Which of the following, if true, best supports a
projection that the spinach-growing facility near
Chicago will be profi table?
(A) Once the operators of the facility are
experienced, they will be able to cut operating
expenses by about 25 percent.
(B) There is virtually no scope for any further
reduction in the cost per pound for California
field spinach.
(C) Unlike washed fi eld spinach, the hydroponically
grown spinach is untainted by any pesticides or
herbicides and thus will sell at exceptionally high
prices to such customers as health food
restaurants.
(D) Since spinach is a crop that ships relatively well,
the market for the hydroponically grown spinach
is no more limited to the Chicago area than the
market for California fi eld spinach is to
California.
(E) A second hydroponic facility is being built in
Canada, taking advantage of inexpensive
electricity and high vegetable prices.



We need to explain how spinach-growing facility near Chicago could be profitable. Note that the argument tells us that the production of factory spinach costs 4 times as much as field spinach. Say field spinach costs $1 per pack to produce and factory spinach costs $4 per pack to produce. To be profitable factory spinach will need to be sold at $5 per pack but field spinach can be easily sold at $1.50 per pack. So it seems that no one will buy the factory spinach because it will be way too expensive relative to the field spinach.

Also note that productivity per acre has no role to play here. We have been given that factory spinach production costs 4 time more. So it includes the cost of land and resources. When you sum it all up, you see that cost per packet for factory spinach is 4 times as much.

Let's look at the options now. We need one which can tell us why people may be willing to buy the much more expensive factory spinach.

(A) Once the operators of the facility are
experienced, they will be able to cut operating
expenses by about 25 percent.

A 25% cut and that too only in operating costs (not in the fixed costs) will have no meaningful effect. The cost of production might go down to $3.5 per pack. We will still need to sell it at a much higher cost that field spinach.

(B) There is virtually no scope for any further
reduction in the cost per pound for California
field spinach.

Out of scope. We don't even know if there is any scope of cost reduction in factory spinach. And even if there is, we don't know how much. Also scope of reduction and actual reduction are very different things.

(C) Unlike washed fi eld spinach, the hydroponically
grown spinach is untainted by any pesticides or
herbicides and thus will sell at exceptionally high
prices to such customers as health food
restaurants.

Now here is a reason why people may buy the $5 per pack spinach. This may mean that the factory may be profitable after all.

(D) Since spinach is a crop that ships relatively well,
the market for the hydroponically grown spinach
is no more limited to the Chicago area than the
market for California fi eld spinach is to
California.

The range of the market is not important. We can put the spinach in stores all across the world; the point is will people buy it?

(E) A second hydroponic facility is being built in
Canada, taking advantage of inexpensive
electricity and high vegetable prices.

Out of scope. We are worried about this factory only.

Answer (C)



Hi!
Thanks for this wonderful explanation. I also opted for C first, but then i rejected, thinking that what if there are no such customers as health food restaurants? (Question nowhere mentions such customers). I finally opted for A.
Can you explain on this please.
Thanks
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Re: Near Chicago a newly built hydroponic spinach “factory,” [#permalink]

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New post 25 Jul 2016, 14:46
ashutoshsh wrote:
VeritasPrepKarishma wrote:
WaterFlowsUp wrote:
Near Chicago a newly built hydroponic spinach
“factory,” a completely controlled environment for
growing spinach, produces on 1 acre of fl oor space
what it takes 100 acres of fi elds to produce.
Expenses, especially for electricity, are high, however,
and the spinach produced costs about four times as
much as washed California fi eld spinach, the spinach
commonly sold throughout the United States.
Which of the following, if true, best supports a
projection that the spinach-growing facility near
Chicago will be profi table?
(A) Once the operators of the facility are
experienced, they will be able to cut operating
expenses by about 25 percent.
(B) There is virtually no scope for any further
reduction in the cost per pound for California
field spinach.
(C) Unlike washed fi eld spinach, the hydroponically
grown spinach is untainted by any pesticides or
herbicides and thus will sell at exceptionally high
prices to such customers as health food
restaurants.
(D) Since spinach is a crop that ships relatively well,
the market for the hydroponically grown spinach
is no more limited to the Chicago area than the
market for California fi eld spinach is to
California.
(E) A second hydroponic facility is being built in
Canada, taking advantage of inexpensive
electricity and high vegetable prices.



We need to explain how spinach-growing facility near Chicago could be profitable. Note that the argument tells us that the production of factory spinach costs 4 times as much as field spinach. Say field spinach costs $1 per pack to produce and factory spinach costs $4 per pack to produce. To be profitable factory spinach will need to be sold at $5 per pack but field spinach can be easily sold at $1.50 per pack. So it seems that no one will buy the factory spinach because it will be way too expensive relative to the field spinach.

Also note that productivity per acre has no role to play here. We have been given that factory spinach production costs 4 time more. So it includes the cost of land and resources. When you sum it all up, you see that cost per packet for factory spinach is 4 times as much.

Let's look at the options now. We need one which can tell us why people may be willing to buy the much more expensive factory spinach.

(A) Once the operators of the facility are
experienced, they will be able to cut operating
expenses by about 25 percent.

A 25% cut and that too only in operating costs (not in the fixed costs) will have no meaningful effect. The cost of production might go down to $3.5 per pack. We will still need to sell it at a much higher cost that field spinach.

(B) There is virtually no scope for any further
reduction in the cost per pound for California
field spinach.

Out of scope. We don't even know if there is any scope of cost reduction in factory spinach. And even if there is, we don't know how much. Also scope of reduction and actual reduction are very different things.

(C) Unlike washed fi eld spinach, the hydroponically
grown spinach is untainted by any pesticides or
herbicides and thus will sell at exceptionally high
prices to such customers as health food
restaurants.

Now here is a reason why people may buy the $5 per pack spinach. This may mean that the factory may be profitable after all.

(D) Since spinach is a crop that ships relatively well,
the market for the hydroponically grown spinach
is no more limited to the Chicago area than the
market for California fi eld spinach is to
California.

The range of the market is not important. We can put the spinach in stores all across the world; the point is will people buy it?

(E) A second hydroponic facility is being built in
Canada, taking advantage of inexpensive
electricity and high vegetable prices.

Out of scope. We are worried about this factory only.

Answer (C)



Hi!
Thanks for this wonderful explanation. I also opted for C first, but then i rejected, thinking that what if there are no such customers as health food restaurants? (Question nowhere mentions such customers). I finally opted for A.
Can you explain on this please.
Thanks



The question states "if true". This implies when answering you will need to take the statements as true. The statement "The H spinach will sell to..." has to be taken as true while answering, i.e. there exist such customers.
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Re: Near Chicago a newly built hydroponic spinach “factory,” [#permalink]

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ashutoshsh wrote:


Hi!
Thanks for this wonderful explanation. I also opted for C first, but then i rejected, thinking that what if there are no such customers as health food restaurants? (Question nowhere mentions such customers). I finally opted for A.
Can you explain on this please.
Thanks



Take a look at the question again:

Which of the following, if true, best supports a projection that the spinach-growing facility near Chicago will be profitable?

We need to support the projection of profit. We don't need to prove it beyond doubt. By saying that factory spinach is pesticide free and hence could sell at high prices to health conscious customers, we are establishing an advantage it has over the field spinach. Hence, it supports our claim that the factory could be profitable. Whether it will actually be profitable, we cannot say and we don't need to say. Option (C) tells us that there are customers who are health conscious. Note that we don't know whether they will be willing to buy a product at 4 times the cost no matter what the health concerns. Hence, we are not establishing that the factory will be profitable. All we are doing is supporting the claim.
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Near Chicago a newly built hydroponic spinach “factory,” [#permalink]

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Choice C presents an advantage to the hydroponically grown spinach-it can be sold to certain customers who are prepared to pay very high prices for it. This supports the projection that the facility will be profitable, and is thus the best answer. Choice A and B present the likelihood of changes in the cost of the two kinds of spinach, but neither choice suggests that the current large price differential can be overcome, so neither supports the projection. Choice D presents one advantage shared by the two kinds of spinach, but it does nothing to diminish the cost disadvantage of hydropnonic spinach. Choice E gives some reason to think that another hydroponic facility can be profitable but gives no reason to think that the facility under discussion can be so.

Detailed explanation for option A and D,
right now there is a cost discrepancy of 4:1 between the two types of product.

choice (a) talks about cutting "operating expenses" by %25.

two big problems here.

first, we have no idea of the significance of "operating expenses" in the overall picture (i.e., what fraction of total costs is thereby represented).

second--and much more importantly--a %25 reduction can't possibly make up for a 4:1 discrepancy.
even if "operating expenses" encompasses ALL costs, a %25 reduction would still leave a 3:1 discrepancy.

Choice (d) works neither for nor against the argument that the hydroponic spinach will be profitable. It states something that's equally advantageous for each of the 2 varieties of spinach.

(So, fine, it's just as easy to transport the hydroponic spinach as to transport the normal field spinach. But that does nothing to mitigate the issue, which is the 4-fold cost discrepancy.)
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Re: Near Chicago a newly built hydroponic spinach “factory,” [#permalink]

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New post 07 Feb 2018, 11:38
VeritasPrepKarishma wrote:
WaterFlowsUp wrote:
Near Chicago a newly built hydroponic spinach
“factory,” a completely controlled environment for
growing spinach, produces on 1 acre of fl oor space
what it takes 100 acres of fi elds to produce.
Expenses, especially for electricity, are high, however,
and the spinach produced costs about four times as
much as washed California fi eld spinach, the spinach
commonly sold throughout the United States.
Which of the following, if true, best supports a
projection that the spinach-growing facility near
Chicago will be profi table?
(A) Once the operators of the facility are
experienced, they will be able to cut operating
expenses by about 25 percent.
(B) There is virtually no scope for any further
reduction in the cost per pound for California
field spinach.
(C) Unlike washed fi eld spinach, the hydroponically
grown spinach is untainted by any pesticides or
herbicides and thus will sell at exceptionally high
prices to such customers as health food
restaurants.
(D) Since spinach is a crop that ships relatively well,
the market for the hydroponically grown spinach
is no more limited to the Chicago area than the
market for California fi eld spinach is to
California.
(E) A second hydroponic facility is being built in
Canada, taking advantage of inexpensive
electricity and high vegetable prices.



We need to explain how spinach-growing facility near Chicago could be profitable. Note that the argument tells us that the production of factory spinach costs 4 times as much as field spinach. Say field spinach costs $1 per pack to produce and factory spinach costs $4 per pack to produce. To be profitable factory spinach will need to be sold at $5 per pack but field spinach can be easily sold at $1.50 per pack. So it seems that no one will buy the factory spinach because it will be way too expensive relative to the field spinach.

Also note that productivity per acre has no role to play here. We have been given that factory spinach production costs 4 time more. So it includes the cost of land and resources. When you sum it all up, you see that cost per packet for factory spinach is 4 times as much.

Let's look at the options now. We need one which can tell us why people may be willing to buy the much more expensive factory spinach.

(A) Once the operators of the facility are
experienced, they will be able to cut operating
expenses by about 25 percent.

A 25% cut and that too only in operating costs (not in the fixed costs) will have no meaningful effect. The cost of production might go down to $3.5 per pack. We will still need to sell it at a much higher cost that field spinach.

(B) There is virtually no scope for any further
reduction in the cost per pound for California
field spinach.

Out of scope. We don't even know if there is any scope of cost reduction in factory spinach. And even if there is, we don't know how much. Also scope of reduction and actual reduction are very different things.

(C) Unlike washed fi eld spinach, the hydroponically
grown spinach is untainted by any pesticides or
herbicides and thus will sell at exceptionally high
prices to such customers as health food
restaurants.

Now here is a reason why people may buy the $5 per pack spinach. This may mean that the factory may be profitable after all.

(D) Since spinach is a crop that ships relatively well,
the market for the hydroponically grown spinach
is no more limited to the Chicago area than the
market for California fi eld spinach is to
California.

The range of the market is not important. We can put the spinach in stores all across the world; the point is will people buy it?

(E) A second hydroponic facility is being built in
Canada, taking advantage of inexpensive
electricity and high vegetable prices.

Out of scope. We are worried about this factory only.

Answer (C)


Thanks a ton Karishma. you have explained it so well.
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Re: Near Chicago a newly built hydroponic spinach “factory,” [#permalink]

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New post 18 Apr 2018, 03:55
VeritasPrepKarishma, GMATNinja, egmat

Why is option A rejected?
I feel that option A takes care of reducing the costs in future, making the business sustainable. However, I agree that we cannot comment about the degree of savings.
But, OA C also doesn't talk about the quantum of customers. The revenues generated on account of exceptionally high costs may also be at a lower level if customers are few.
So, what is the basis of choosing option C wrt A?
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Re: Near Chicago a newly built hydroponic spinach “factory,” [#permalink]

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New post 19 Apr 2018, 12:59
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gmatacer40 wrote:
VeritasPrepKarishma, GMATNinja, egmat

Why is option A rejected?
I feel that option A takes care of reducing the costs in future, making the business sustainable. However, I agree that we cannot comment about the degree of savings.
But, OA C also doesn't talk about the quantum of customers. The revenues generated on account of exceptionally high costs may also be at a lower level if customers are few.
So, what is the basis of choosing option C wrt A?

Check out this post by vnigam21 and see if that helps!
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Re: Near Chicago a newly built hydroponic spinach “factory,”   [#permalink] 19 Apr 2018, 12:59
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