FYI: for future ref: this is a GPREP QUESTION.

uptowngirl92 wrote:FYI: for future ref: this is a GPREP QUESTION.

And here's how we would attack it:


In a paradox question, you should have the answers to two questions very clear in your head before you go to the answer choices:

1) What is the paradox (ie, surprise)?

2) Why is it paradoxical (ie, surprising)?

Remember, a paradox is just: something unexpected happened (surprise!) Always search for a keyword that will help you find the surprise, usually: but, yet, although, or in this case surprising

The surprise is: Denoma's sales fell BUT sales from their Denoma cars increased

It is surprising because: if their sales fell, you would expect the opposite.

Now, when we go to the answer choices, we only ask one question to ourselves: Would this make the surprise make sense? Know that many wrong answers will be outside the scope or else be 180s (they will actually make the surprise more surprising not less).

Scanning for a choice that will be logically capable of resolving the surprise:

A. Because of the need to educate the public about its new models' capabilities, Denoma's advertising spending was higher than normal over the period.
High ad spending would not explain why sales went down. Next.
Choice B is clearly outside the scope.

C A significant proportion of Denoma's revenue comes from making components for other consumer-electronics manufacturers.

So a huge chunk of their sales comes from components to other manufacturers rather than selling cars directly to people. So even though they are selling a lot of cars to people, this fact introduces a salient explanation for why their overall sales went down at the same time: the company's bread and butter is selling parts not cars. What if parts sales went way down? That would definitely be capable of resolving our surprise.
Choose C

IMO E wont fit here.
Because, doing so will crtainly affect the revenues of the retailers not The Denoma's.

Whereas C is able to remove the entanglement clearly.
It says D's major chunk of revenues comes from making components to other Manufacturers.

IMO C, even though the sales grew, they are not the only variable responsible for Denoma`s revenues. If the other participants` revenues decreased and Denoma acts as a 3rd party, the revenues from this service will decrease, hence the Denoma`s results wont be as good as they would if it only considered the sales of its own products

E loses on very simple points.

1. If the retailers are selling old models of Denomo that too with heavy discounts, their sales revenues cannot increase substantially for Denomo products. Also if they are thanking Denomo for its quality and innovative products, they need not discount those products to sell them. (Basic consumer feeling: discounted products may not be of 100% quality)

2. Even in the worst scenario, loss for retailers cannot be implied to loss for Denomo since they have distributed their products to retailers long back and it is basic economics that retailers selling products for discounts will not effect the manufacturers.

raghavakumar85 wrote:E loses on very simple points.

1. If the retailers are selling old models of Denomo that too with heavy discounts, their sales revenues cannot increase substantially for Denomo products. Also if they are thanking Denomo for its quality and innovative products, they need not discount those products to sell them. (Basic consumer feeling: discounted products may not be of 100% quality)

2. Even in the worst scenario, loss for retailers cannot be implied to loss for Denomo since they have distributed their products to retailers long back and it is basic economics that retailers selling products for discounts will not effect the manufacturers.

I agree with u Raghav!

superseded = set aside. These are the old models that are sold for deep discounts. These are not even the same "innovative and popular models" that increased revenue sales of Denoma products.

Most of Denoma's sales revenue does not come from selling to retailers. Trust me. I investigated the company (jk). But rather the majority of Denoma's revenue comes from making components for other manufacturers. WAIT! And yes! These are the same manufacturers whose products did not sale with the electronic retailers.

you have to pay attention when reading the text, the last part says,
" their sales revenue from Denoma models actually grew, largely thanks to some innovative and popular models that Denoma introduced." ,
so E is out because they were selling remaining units, with other words, old.

That is exactly where I got stuck..... man...
reading each and every word carefully in the gmat is extremely crucial...

Liked the question. Got it wrong in the first attempt. Thanks for posting!

lilu wrote:Denoma, a major consumer-electronics maker, had a sizeable decline in sales revenue for its most recent fiscal year. This result appears surprising, because electronics retailers report that although their overall sales were considerably lower than in the previous year, their sales revenue from Denoma models actually grew, largely thanks to some innovative and popular models that Denoma introduced.

Which of the following, if true, does most to explain the apparently surprising result?

A. Because of the need to educate the public about its new models' capabilities, Denoma's advertising spending was higher than normal over the period.
B. For the period at issue, Denoma's major competitors reported declines in revenue that were, in percentage terms, greater than Denoma's.
C. A significant proportion of Denoma's revenue comes from making components for other consumer-electronics manufacturers.
D. Unlike some of its major competitors, Denoma has no lines of business outside consumer electronics to provide revenue when retail sales of consumer electronics are weak.
E. During the period, consumer-electronics retailers sold remaining units of Denoma's superseded models at prices that were deeply discounted from those models' original prices.

OA is C

I guess the answer will be clearer if we can understand the argument itself better.
Arguments says This result appears surprising, because electronics retailers report that although their overall sales were considerably lower than in the previous year, their sales revenue from Denoma models actually grew, largely thanks to some innovative and popular models that Denoma introduced.
It is clearly mentioned that the overall sales of the the retailer have decreased but the sales from the Denoma's products have increased. So it is clear that there is a decline in sales of other manufacturers' products.
So if significant proportion of Denoma's revenue comes from making components for other consumer-electronics manufacturers and those manufacturers' have faced a decrease in sales and hence as a result of which Denoma had a sizeable decline in sales revenue.
Hence answer is C

Hope it helps!

I was attracted to this one by sheer volume of the replies it got. On doing it I thought that it was a fairly regulation CR with a clear choice C. Since a number of you got it wrong, or were leaning towards E, I have put together an explanation of how to read the question.

We are given:

Denoma, a major consumer-electronics maker, had a sizeable decline in sales revenue for its most recent fiscal year. This result appears surprising, because electronics retailers report that although their overall sales were considerably lower than in the previous year, their sales revenue from Denoma models actually grew, largely thanks to some innovative and popular models that Denoma introduced.

Let's dissect this paragraph, I will translate each line, one at a time, so that by the end of it, the correct answer is clear to everyone. If you pay attention to the bold parts, I feel it will be easier for you to think about this one.

We are given:

1. Denoma, a major consumer-electronics maker, had a sizeable decline in sales revenue for its most recent fiscal year:
1. Translation: Denoma is an-electronics maker. Denoma had a sizeable decline in sales revenue in the recent fiscal year.

2. This result appears surprising, because electronics retailers report that although their overall sales were considerably lower than in the previous year, their sales revenue from Denoma models actually grew, largely thanks to some innovative and popular models that Denoma introduced.
2. Translation: Electronics retailers report that their overall revenues were less, but their sales revenue from Denoma models increased. This is surprising because "Denoma's own revenue was less, while Denoma's products sales by the retailers brought in more money than usual"

We are asked to find which statement explains the apparent paradox where:
1. Denoma, the maker, is bring in less revenue.
2. By selling Denoma's products, retailers are bringing in more revenue.

At this point, you should be well-armed to "beat" this question. Try it on your own without reading the explanation. Let me know what you think.

A. Because of the need to educate the public about its new models' capabilities, Denoma's advertising spending was higher than normal over the period.
This one talks about "spending" and not the revenue. Out of context. NO.

B. For the period at issue, Denoma's major competitors reported declines in revenue that were, in percentage terms, greater than Denoma's.
This one talks about Denoma's competitors. Nothing about the retailer's or Denoma's own. Out of scope. NO.

C. A significant proportion of Denoma's revenue comes from making components for other consumer-electronics manufacturers.
This one talks about the revenue. It explains the paradox by telling us that a large portion of revenue of Denoma comes from their "component-making business". This explains why even though retailers are raking in more money, Denoma is taking a hit on its overall revenue. YES.

D. Unlike some of its major competitors, Denoma has no lines of business outside consumer electronics to provide revenue when retail sales of consumer electronics are weak.
We were told that "retail" sales were stronger as retailers made more money. This is opposite of the factual premise. NO.

E. During the period, consumer-electronics retailers sold remaining units of Denoma's superseded models at prices that were deeply discounted from those models' original prices.
"Retailers sold superceded models at deeply discounted prices". This talks about how retailers might have "lost revenue". First of all, retailer's had more revenue. Second and more important, retailer selling at discount should not affect Denomas revenues. We are never told that Denoma sold it to the retailers for less, only that the retailers sold for less. If anything, if the retailers sold the "superceded models" at a deep discount and still made more revenue on Denoma's products, they may have sold a lot more of the newer models of Denoma. This would have helped Denoma in selling more product to the retailers. Hence this one is opposite of what we are trying to explain. NO.

Let me know if this helps