Q18 - Computer store manager

[smiller]

Question Type:
Flaw

Stimulus Breakdown:
Premises:
1. Last year the store made an average profit of 13% on computers selling for > $1000 (high-end) and a typical profit of 25% or more on computers selling for <$1000 (low-end).
2. If the store sells only low-end models then they will probably sell as many computers as they will if they continue selling both low-end and high-end models.

Intermediate Conclusion:
Selling only low-end models will maximize profits.

Main Conclusion:
The store should only sell low-end models.

Answer Anticipation:
When the premises contain a comparison, look for an important piece of information that's being left out. The comparison here is between high-end and low-end computers. We know approximately how much profit the store makes on each type. We know that high-end computers sell for over $1000 and low-end sell for under $1000. What's the missing piece? We don't know the exact price for each type of computer. The high-end models could sell for much more than $1000, and the low-end for much less.

Suppose the low-end computers sell for $10 each, and the high-end for $10,000. The store would make $1,300 on each high-end computer, and $2.50 on each low-end model. Does selling only low-end models still sound like a good idea?

Correct Answer:
(A)

Answer Choice Analysis:
(A) Correct. This describes the flaw that we anticipated above, suggesting that the price of a high-end model could be "significantly" higher.

(B) This by itself doesn't adequately indicate a flaw. The problem with (B) is that it doesn't say anything about the price of each model. Imagine that the models are close in price—say $999 for a low-end model and $1001 for a high-end one. The store might still maximize profits by selling only low-end models. In order for (B) to indicate a flaw, there still must be a significant difference in price.

(C) This doesn't adequately indicate a flaw. Again, without knowing the price of each model, we don't know if this has any impact.

(D) There is a degree issue with "sole objective." The argument assumes that the store should maximize profits. That's the gap between the intermediate conclusion and the main conclusion. But the argument does not assume that this should be the "sole" objective.

(E) There are a few problems with this answer. The manager states that they will "probably" sell the same number of computers if they only sell low-end models. He's not claiming that sales will be exactly the same, and his argument doesn't depend on future sales remaining the same. Even if future sales are slightly lower, this wouldn't undermine the argument unless there is also a significant difference in price between low-end and high-end models.

Also, what exactly does "may not be the same" mean? If sales of low-end computers increase then they won't be the same, and that would help the argument!

Takeaway/Pattern: When the premises contain a comparison, look for the important factor that has been left out of the comparison.

#officialexplanation

[GeneW]

Can someone please explain why A is correct and E incorrect? Thank you.

The high-end computer has to be at least twice as much as the low-end model to make about the same profit. For example, a $1100 computer has a profit of $143, while a model of only $500 yields a profit of $125. In order for the high-end model to turn a profit "significantly higher", it would have to be much more than $1000.

[nbayar1212]

Yes. So E doesn't work for two reasons:

1. the presence of the word "probably" in the conclusion of the stimulus. The computer store manager isn't claiming that they will necessarily sell as many low end models as before, but that they will probably sell as many low end as they have high and low end combined.

2. The last bit I just said above also gets to the second issue i.e. that the manger isn't claiming that they will sell as many low end computers as before - he is claiming that they will probably sell more than they did before. I think this AC is/was tempting because it makes us think that if future sales may not be the same as past sales, they will probably be less than past sales... but this doesn't have to be the case.

A is correct because we aren't told how much more expensive the high end computers are than their definition requires i.e. we just know that to be a high end computer, you will be costing more than 1000 dollars...but that only puts a floor on the price and not a ceiling. The computer can cost 100,000 dollars for all we know. And selling a few 100,000 computers with a 13% profit margin may very well be more profitable than selling two dozen low end computers (defined as anything under 1000 dollars) at 100 dollars with a 25% profit margin.

Make sense?

[Mab6q]

Would it be correct to say the argument assumes the low-end models will continue to have better margins than the higher-end models? I know that's not what E says because it refers to sales, but that's what I incorrectly interpreted it as saying.