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GMATPrep QP1 : Sol Citrus, a small orchard that produces

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GMATPrep QP1 : Sol Citrus, a small orchard that produces

Post Tue Sep 26, 2017 2:58 am
Sol Citrus, a small orchard that produces only organic citrus fruit, has faced new competition ever since Mega Citrus, a much larger orchard from a neighboring state, began shipping fruit across state lines. In an attempt to increase its market share and take business away from Sol Citrus, Mega Citrus recently began competing directly with Sol Citrus at local farmers’ markets, selling non-organic oranges at a price per pound that is 30% lower than Sol Citrus’s current price. Although most of the patrons of those farmers' markets consider low prices to be a priority when selecting fruit, the owners of Sol Citrus have decided that they will not lower current orange prices in response to Mega Citrus's move.

Which of the following, if true, best explains Sol Citrus’s decision not to lower prices?

(A) Some consumers consider higher prices to a be a sign of higher quality.
(B) In each of the five years before Mega Citrus began shipping fruit across state lines, sales of Sol Citrus oranges at local farmers' markets exceeded combined sales of oranges from all other orchards selling fruit at the markets.
(C) If Sol Citrus were to lower its prices by just 20%, most of its regular farmers' market customers would continue buying Sol Citrus oranges instead of Mega Citrus oranges.
(D) When purchasing citrus fruit, most customers of the farmers' markets consider the fruit’s classification as "organic" to be more important than the cost of the fruit.
(E) Unlike Sol Citrus, Mega Citrus grows genetically modified fruits sprayed with pesticides that are illegal in the state in which Sol Citrus is located.

OA: D

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Post Tue Sep 26, 2017 11:01 am
NandishSS wrote:
Sol Citrus, a small orchard that produces only organic citrus fruit, has faced new competition ever since Mega Citrus, a much larger orchard from a neighboring state, began shipping fruit across state lines. In an attempt to increase its market share and take business away from Sol Citrus, Mega Citrus recently began competing directly with Sol Citrus at local farmers’ markets, selling non-organic oranges at a price per pound that is 30% lower than Sol Citrus’s current price. Although most of the patrons of those farmers' markets consider low prices to be a priority when selecting fruit, the owners of Sol Citrus have decided that they will not lower current orange prices in response to Mega Citrus's move.

Which of the following, if true, best explains Sol Citrus’s decision not to lower prices?

(A) Some consumers consider higher prices to a be a sign of higher quality.
(B) In each of the five years before Mega Citrus began shipping fruit across state lines, sales of Sol Citrus oranges at local farmers' markets exceeded combined sales of oranges from all other orchards selling fruit at the markets.
(C) If Sol Citrus were to lower its prices by just 20%, most of its regular farmers' market customers would continue buying Sol Citrus oranges instead of Mega Citrus oranges.
(D) When purchasing citrus fruit, most customers of the farmers' markets consider the fruit’s classification as "organic" to be more important than the cost of the fruit.
(E) Unlike Sol Citrus, Mega Citrus grows genetically modified fruits sprayed with pesticides that are illegal in the state in which Sol Citrus is located.
Fact 1:
Mega Citrus recently began competing directly with Sol Citrus at local farmers’ markets, selling non-organic oranges at a price that is 30% lower than Sol Citrus’s current price.
Fact 2:
Sol Citrus, a small orchard that produces only organic citrus fruit, has decided not lower its price in response to Mega Citrus's move..

The correct answer must explain why Sol Citrus has decided not to lower its price.

D: Most customers of the farmers' markets consider the fruit’s classification as "organic" to be more important than the cost of the fruit.
Since Sol Citrus's fruit is organic, while Mega Citrus's fruit is not -- and this distinction is more important to consumers than price -- there is no reason for Sol Citrus to lower its price.

The correct answer is D.

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Post Tue Sep 26, 2017 9:08 am
NandishSS wrote:
Sol Citrus, a small orchard that produces only organic citrus fruit, has faced new competition ever since Mega Citrus, a much larger orchard from a neighboring state, began shipping fruit across state lines. In an attempt to increase its market share and take business away from Sol Citrus, Mega Citrus recently began competing directly with Sol Citrus at local farmers’ markets, selling non-organic oranges at a price per pound that is 30% lower than Sol Citrus’s current price. Although most of the patrons of those farmers' markets consider low prices to be a priority when selecting fruit, the owners of Sol Citrus have decided that they will not lower current orange prices in response to Mega Citrus's move.

Which of the following, if true, best explains Sol Citrus’s decision not to lower prices?

(A) Some consumers consider higher prices to a be a sign of higher quality.
(B) In each of the five years before Mega Citrus began shipping fruit across state lines, sales of Sol Citrus oranges at local farmers' markets exceeded combined sales of oranges from all other orchards selling fruit at the markets.
(C) If Sol Citrus were to lower its prices by just 20%, most of its regular farmers' market customers would continue buying Sol Citrus oranges instead of Mega Citrus oranges.
(D) When purchasing citrus fruit, most customers of the farmers' markets consider the fruit’s classification as "organic" to be more important than the cost of the fruit.
(E) Unlike Sol Citrus, Mega Citrus grows genetically modified fruits sprayed with pesticides that are illegal in the state in which Sol Citrus is located.

OA: D
The scenario:

Sol Citrus sells organic/ more expensive fruit

Mega Citrus sells non-organic cheaper fruit

Why might Sol Citrus continue to dominate the market? Well, the choice is between cost-savings (Mega Citrus) and getting organic produce (Sol Citrus.) If consumers care enough about getting organic produce that they're willing to pay more for their fruit, Sol Citrus' plan not to lower prices makes perfect sense. Put another way, if consumers are determined to buy organic, any product that isn't organic isn't going to serve as competition, no matter the cost savings. The answer is D

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