On Monday, Daisy’s Lemonade Stand sold lemonade at 20 cents per cup. T

OFFICIAL EXPLANATION

The passage gives information about Monday’s business at two lemonade stores. The question asks us to make an assertion, or conclusion, based on the information provided. The answer choice that requires no additional assumptions will be the correct answer.

(A) This conclusion is incorrect. If Daisy’s sells its lemonade at a lower price than the Lemon Shack, and if the stores reported identical revenues for the day, then Daisy’s sold more cups of lemonade than the Lemon Shack, not less.

(B) We know nothing about the quality of lemonade at either store.

(C) CORRECT. If the stores reported identical revenues and identical profits, the profit equation Profit = Revenue – Cost tells us that their costs must have been identical as well.

(D) We know nothing about the preferences of lemonade consumers.

(E) We know nothing about the market conditions surrounding either store. Therefore, we cannot make any conclusions about what might happen if the Lemon Shack were to lower its prices. It is very possible that the Lemon Shack could in fact sell many more cups per day at lower prices, and it’s possible this could lead to higher revenues.

Nice one. IMO C. Since Costs(expenses) = Revenues-Profits, and since the costs were identical for both stands the answer automatically converges towards C. Another point to note here is the argument mentions the situation for Monday only so it becomes more likely that the assertion for the argument would be based on what concludes on Monday and would seldom be a generic one.

Regards,
meshtrap

between C and D .. C
is better ...as it is indorectly given in the question itself ... however D would be a slighlty exaggerated assertion regarding consumer liking

Two mathematical properties to know:
1. Total Sales Revenue = Total Quantity Sold * Price per Unit
2. Profit = Revenue - Expenses/Costs

[B], [D], and [E] are unsupported by the passage as quality, consumer preference, and price changes are not mentioned.

[A] is a reverse-trap. Daisy's Stand charged less than the Lemon Shack but they both had the same level of revenue. Daisy's Stand would have to have sold more cups.

[C] is correct. If both businesses incurred the same revenues, then the only way for them to reach the same level of profits is to incur the same level of costs.

Can anyone explain why not D??
If revenues are equal and price of lemonade is less at Daisy’s then this implies quantity sold must be more at Daisy's.
So, we can say lemonade consumers prefer the lemonade at Daisy’s Lemonade Stand to the Lemonade at the Lemon Shack.

An inference is a statement that MUST BE TRUE, given the information in the passage.
One approach is to apply the NEGATION TEST.
When the correct answer is negated, the passage will be contradicted.

C, negated:
On Monday, Daisy’s Lemonade Stand and the Lemon Shack incurred UNEQUAL costs.
If the two stands incurred UNEQUAL costs, then the identical revenues earned at each stand would have to yield UNEQUAL profits, contradicting the given information that the two stands reported IDENTICAL profits.
Since the negation of C contradicts the passage, C is a valid inference: a statement that MUST BE TRUE, given the information in the passage.

The statements above best support which of the following assertions?

Argument - Cost of D lemonade = 20 cents/cup. Cost of LS lemonade = 30 cents / cup/
End of the day - same revenue and same profits.

(A) On Monday, Daisy’s Lemonade Stand sold fewer cups of lemonade than did the Lemon Shack.
- This is opposite to actual scenario. If revenue is same, the number of cups sold must have been higher for the lower priced product. Hence, the D lemonade should have sold higher number of cups than LS lemonade
- Wrong

(B) The Lemon Shack sells higher quality lemonade than does Daisy’s Lemonade Stand.
- The argument is discussing about a single day phenomenon. We cannot judge the quality based on this. May be, the lemonade was simply hyped, and the customers realized the quality difference that day and switched to D lemonade later on.
- Wrong

(C) On Monday, Daisy’s Lemonade Stand and the Lemon Shack incurred identical costs to run their businesses.
- Profits are same. Revenue is same. Costs = Revenue - profits. Hence, costs are also same
- Correct

(D) In general, lemonade consumers prefer the lemonade at Daisy’s Lemonade Stand to the Lemonade at the Lemon Shack.
- May be, the D lemonade was open for only 2 hours and was closed for the rest of the day. Hence, people had to drink LS lemonade. But had the D lemonade shack been open people would have preferred D than LS. - We do not know
- Wrong

(E) The Lemon Shack would not increase its revenues by lowering its prices.
- The future projection is out of scope of this argument
- Wrong

Given: 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.

Since Revenues = Costs + Profits and Daisy’s Lemonade Stand and the Lemon Shack reported identical revenues and identical profits, Daisy’s Lemonade Stand and the Lemon Shack incurred identical costs to run their businesses.

IMO C

Please consider the below scenario and let me know where I am going wrong

20 cents * 30 (quantity) = 600 (Revenue for Daisy)
Profit per cup - 10
Total Profit = 10*30 = 300
Cost involved is = 50
Net Profit - 250


Lemon Shack
30 cents *20 (quantity) = 600 (Revenue for Lemon)
Profit per cup = 20
Total Profit = 20*20 = 400
Cost involved is = 150
Net Profit = 250

Hence, revenue and profit is same but costs involved are different.

GMATNinja @VeritasKarishma

­Let the number of cups sold for daisy be 30 and for shack be 20, since revenue is same.
Total Revenue = 600 for both. 
600 = Cost Price ( Daisy ) + Profit 1
600= Cost Price ( Shack ) + Profit 2 

Profits for both the stalls are the same, so when we subtract the equations-
0= Cost Price ( Daisy ) - Cost Price ( Shack )
Cost Price ( Daisy) = Cost price ( Shack ) ( C ) 

D - prefer? does preference translate to higher number of units sold? I may prefer a ferrari but I still will buy a bmw because I can afford it

C - cost = Profit - rev, given that profits, revenues were identical so naturally then costs must also be identical based on this equation

A - opposite

B - quality?

E - not necessarily true, what if at same price the units sold start increasing then this fails plus this is not relevant to our discussion anyways