kanigmat011 wrote:
can somebody explain option E
I was unable to understand the wording
E) More money was raised during this hour than during the previous three hours, driving down the average out-of-pocket cost of the free gifts.
We take E as true, which means average cost must drop.
Average cost: Total C/Q
Imagine each "gift" is what the pledgers are buying.
Each item is $1; every donor pledges only $1
Each item is matched with a gift of equal value, which essentially means that the pledge drive stops as soon the gifts are gone (and not that there is an infinite quantity of gifts on hand, though the organizers can simply go out and buy more gifts after receiving the pledges, thereby prolonging the pledge drive for as long as possible with an "unlimited" quantity).
Let's say you start off by buying $10 in gifts:
Hour 1: $1 raised
Average cost after 1 hour: $10/1 = $10.00 per item
Hour 2: $5 raised
Average cost after 2 hours: $10/6 = $1.67 per item
It doesn't give us any information that we don't already know. That is, we already know that at the end of the day, average cost will be $1 in the example above , since all pledges are matched with an equivalent retail value. The total quantity could be 6 with an average cost that's $1.67 with $6 raised, which would still lead to an average cost of $1 at the end of the pledge drive. Or, it could be $100 in initial cost with $100 raised in pledges with an average cost of $1 after just the first hour. The total cost is equivalent to the total pledge amount in all cases.
If you think about it, it doesn't make sense to hold a pledge drive by spending the same amount of money on gifts as the amount you will receive from pledges - there are other costs to consider, too, such as shipping, utilities, etc... but that's an aside.