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A
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Difficulty:
95%
(hard)
Question Stats:
28% (01:44) correct
72%
(01:44)
wrong
based on 377
sessions
History
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Result
Not Attempted Yet
Marketing analyst: Several small businesses complain that offering online discount coupons reduces their revenue, since customers who use the coupons pay less. However, companies that have issued such coupons in the past year have seen substantial growth in overall sales. Moreover, there is a strong correlation between increases in the number of coupon downloads and increases in a company’s monthly revenue. Therefore, offering online discount coupons clearly increases sales rather than reduces them.
The analyst’s reasoning is most vulnerable to criticism on which of the following grounds?
A. It overlooks the possibility that two correlated trends may result from an independent factor rather than one causing the other.
B. It assumes, without justification, that customers who use coupons would not have purchased goods at full price.
C. It fails to consider that increased revenue does not necessarily imply increased profits.
D. It presumes that the growth in overall sales occurred only after coupons were introduced.
E. It ignores the possibility that businesses offering coupons differ in important ways from those that do not.
The analyst’s reasoning is most vulnerable to criticism on which of the following grounds?
A. It overlooks the possibility that two correlated trends may result from an independent factor rather than one causing the other.
B. It assumes, without justification, that customers who use coupons would not have purchased goods at full price.
C. It fails to consider that increased revenue does not necessarily imply increased profits.
D. It presumes that the growth in overall sales occurred only after coupons were introduced.
E. It ignores the possibility that businesses offering coupons differ in important ways from those that do not.
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15 Dec 2025, 10:00
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Bunuel
GMAT Club Official Explanation:
The analyst concludes that offering online discount coupons increases profits, relying on evidence that companies issuing such coupons show higher overall sales and that coupon downloads strongly correlate with revenue increases.
This reasoning assumes that the coupon activity causes the increased revenue, rather than both being effects of some other factor that boosts sales and coupon use simultaneously.
(A) Correct. This choice states that the two correlated trends: 1) coupon downloads and 2) revenue increases, may both stem from an independent factor. If this is true, the analyst’s causal conclusion falls apart because the correlation would not show that coupons boost profits. This directly identifies the correlation-versus-causation flaw in the argument.
The unjustified causal link made here is that just because increase in number of coupon downloads is correlated with increase in revenue, it is what's causing the increased revenue. This doesn't have to be true - this is something that comes out as a flaw even before the revenue-profits link. This is why A) is the correct answer.
(B) Incorrect. This option claims the argument assumes coupon users would not have purchased at full price. The analyst never makes this assumption; the argument does not compare hypothetical full-price behavior with discounted purchases.
(C) Incorrect. This choice notes that revenue increases do not guarantee profit increases. While true in general, this is not the flaw the argument relies on. The core issue is treating correlation as causation, not misinterpreting revenue as profit.
(D) Incorrect. This option suggests the analyst assumes sales growth began only after coupons were introduced. The conclusion does not require such a timeline; it rests instead on the correlation between coupon downloads and revenue.
(E) Incorrect. This introduces differences between businesses that use coupons and those that do not, but the argument makes no comparison to non-coupon-issuing businesses. This issue is irrelevant to the reasoning presented.
General Discussion
15 Dec 2025, 09:07
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This is a classic GMAT trap. The test-maker is banking on you treating "Revenue" and "Profit" as the same thing. They aren't.
The answer is (C).
Here is the simple logic:
The analyst proves that Revenue (total money coming in) is up.
Then they jump to the conclusion that Profit (money you keep) is up.
Why that’s wrong:
Think about it this way: You could open a store selling iPhones for $10 each.
Would your Revenue go up? Absolutely.
You’d have a line around the block. You’d be bringing in cash hand over fist.
Would your Profit go up? No. You’d be losing hundreds of dollars on every single phone. You’d go bankrupt in a week.
That’s exactly what Option (C) points out. Coupons might drive huge sales numbers (Revenue), but because you are lowering the price, your margins might get crushed, meaning you actually make less profit.
Why the others are incorrect traps:
A (Correlation/Causation): This is a standard GMAT flaw, but in this specific prompt, the "Revenue vs. Profit" error is more immediate. Even if the coupons definitely caused the revenue increase (so A is not the issue), the conclusion about profit would still be wrong.
B (Cannibalization): This explains why profits might drop (existing customers paying less), but Option C is the broader logical bucket that contains this idea.
D (Timing): This attacks the timeline, but the core issue is the math, not the calendar.
E (Sample Bias): This attacks the data source. While valid, it is not as devastating as the fundamental misunderstanding of business math in Option C.
[quote="Bunuel"]Marketing analyst: Several small businesses complain that offering online discount coupons reduces their revenue, since customers who use the coupons pay less. However, companies that have issued such coupons in the past year have seen substantial growth in overall sales. Moreover, there is a strong correlation between increases in the number of coupon downloads and increases in a company’s monthly revenue. Therefore, offering online discount coupons clearly increases profits rather than reduces them.
The analyst’s reasoning is most vulnerable to criticism on which of the following grounds?
A. It overlooks the possibility that two correlated trends may result from an independent factor rather than one causing the other.
B. It assumes, without justification, that customers who use coupons would not have purchased goods at full price.
C. It fails to consider that increased revenue does not necessarily imply increased profits.
D. It presumes that the growth in overall sales occurred only after coupons were introduced.
E. It ignores the possibility that businesses offering coupons differ in important ways from those that do not.[/quote]
The answer is (C).
Here is the simple logic:
The analyst proves that Revenue (total money coming in) is up.
Then they jump to the conclusion that Profit (money you keep) is up.
Why that’s wrong:
Think about it this way: You could open a store selling iPhones for $10 each.
Would your Revenue go up? Absolutely.
You’d have a line around the block. You’d be bringing in cash hand over fist.
Would your Profit go up? No. You’d be losing hundreds of dollars on every single phone. You’d go bankrupt in a week.
That’s exactly what Option (C) points out. Coupons might drive huge sales numbers (Revenue), but because you are lowering the price, your margins might get crushed, meaning you actually make less profit.
Why the others are incorrect traps:
A (Correlation/Causation): This is a standard GMAT flaw, but in this specific prompt, the "Revenue vs. Profit" error is more immediate. Even if the coupons definitely caused the revenue increase (so A is not the issue), the conclusion about profit would still be wrong.
B (Cannibalization): This explains why profits might drop (existing customers paying less), but Option C is the broader logical bucket that contains this idea.
D (Timing): This attacks the timeline, but the core issue is the math, not the calendar.
E (Sample Bias): This attacks the data source. While valid, it is not as devastating as the fundamental misunderstanding of business math in Option C.
[quote="Bunuel"]Marketing analyst: Several small businesses complain that offering online discount coupons reduces their revenue, since customers who use the coupons pay less. However, companies that have issued such coupons in the past year have seen substantial growth in overall sales. Moreover, there is a strong correlation between increases in the number of coupon downloads and increases in a company’s monthly revenue. Therefore, offering online discount coupons clearly increases profits rather than reduces them.
The analyst’s reasoning is most vulnerable to criticism on which of the following grounds?
A. It overlooks the possibility that two correlated trends may result from an independent factor rather than one causing the other.
B. It assumes, without justification, that customers who use coupons would not have purchased goods at full price.
C. It fails to consider that increased revenue does not necessarily imply increased profits.
D. It presumes that the growth in overall sales occurred only after coupons were introduced.
E. It ignores the possibility that businesses offering coupons differ in important ways from those that do not.[/quote]
