varotkorn wrote:
I'm not sure what The average RATE of decrease in cost means.
Why isn't The average RATE of decrease in cost = \(\frac{AVG. previous - AVG. this}{AVG. PREVIOUS}\)?
In other words, I thought the equation would be [C(a+10)/(a+10) - C(a)/a]/C(a+10)/(a+10)
Aren't we looking for a percentage decrease?
I agree with what Chetan has said above - there is something wrong with the wording of the question. I've seen three official Quant questions in my life that were flawed for one reason or another (out of about ten thousand I've seen in total, so it's extremely rare) but this is one of them. If you read the question literally, the chart is saying that the company will pay $25,000 in order to produce zero products, but will pay less than that in total if they instead produce 50,000 products. That doesn't make any logical sense -- when you make more things, your cost
per unit normally goes down, but your total costs obviously don't go down. But that's what this question literally says. The costs in the C(x) column, as Chetan points out, are surely meant to be per 10,000 units (or something like that). Then it would make sense that the company saves money
per unit as they scale up their production.
This question is really trying to test a concept from calculus, but in a simple enough way that you don't need to know calculus to answer it. When we talk about the rate of decrease or rate of increase of a curve at a point, we're talking about the curve's slope at that point. In calculus you learn how to compute the exact slope of a curve at any point. But if you can approximate the curve using short straight lines, you can approximate the slope of the curve at various points by finding the slopes of those lines. That's what we can do using the values in the table provided in this question -- the table is letting us approximate this curve (which is a parabola) with four line segments. The slope of each line segment tells us how quickly the cost is decreasing. So we want to calculate "rise/run" between each successive pair of points, but for each, "run" is just 10, so we can just compare the change in C(x), the righthand column of the table, and find when the decrease is smallest. That's why the solutions above just using subtraction are perfectly correct.
If you did know calculus (which you don't need on the GMAT), you could also just compute the derivative of C(x), which is 0.08x - 8.5. That's the slope of the curve C(x) at any point x. The slope clearly increases as x does, and we'll get the smaller rate of decrease the larger x is (when the curve is, in fact, decreasing -- it will start increasing when x > 106.25).
varotkorn wrote:
Please confirm whether the highlighted part is incorrect.
Chetan was right that the equation is U-shaped parabola.
However, the more value of x, the GREATER will be the INCREASE of C(x) (as attached herein).
No, Chetan was right. The vertex of the parabola is at x = 106.25. So for the values of x the question is asking about, the parabola is falling. It only starts rising when x becomes larger than 106.25. It falls less and less quickly as you move towards x = 106.25 from the left.
Overall, this is a strange question, and the wording is problematic. I very much doubt you'll see something similar on your test, so I wouldn't worry about it much.