Critical Reasoning

Near Chicago a newly built hydroponic spinach "factory," a completely controlled environment for growing spinach, produces on 1 acre of floor space what it takes 100 acres of fields to produce. Expenses, especially for electricity, are high, however, and the spinach produced costs about four times as much as washed California field spinach, the spinach commonly sold throughout the United States.

Which of the following, if true, best supports the projection that the spinach-growing facility near Chicago will be profitable?

(A) Once the operators of the facility are experienced, they will be able to cut operating expenses by about 25 percent.
(B) There is virtually no scope for any further reduction in the cost per pound for California field spinach.
(C) Unlike washed field spinach, the hydropoincally grown spinach is untainted by any pesticides or herbicides and thus will sell at exceptionally high prices to such customers as health food restaurants.
(D) Since spinach is a crop that ships relatively well, the market for the hydroponically grown spinach is no more limited to the Chicago area than the market for California field spinach is to California.
(E) A second hydroponic facility is being built in Canada, taking advantage of inexpensive electricity and high vegetable prices.

Why D is wrong/right here? Please explain

Additional Cost : Electricity.
Product sells for 4 times what washed California field spinach sells for.

The facility is profitable. What supports this?

A good way to rule out answer choices in these question types, is to ask the question - So what? or Who cares about that?

A. Cut operating expenses by 25%. How do you know if this will ensure profitability?

B. The price for field spinach will remain as it is. So what?

C. This tells us our product will sell for high prices and has a specific market which it can cater to. These directly support the projection that it will still be profitable.

D. Both types of spinach can be sold everywhere. So what? The hydroponic spinach may still be unprofitable thought it CAN be sold everywhere.

E. We're talking about THIS facility. Who cares about another one?

Pick C.

D is wrong because even if you can sell hydroponically grown spinach in more than one markets, it doesn't mean people are going to buy such an expensive spinach.

In option C, it is guarantied that there is market for expensive hydroponically grown spinach and that people are going to buy it.

ssgmatter wrote:Near Chicago a newly built hydroponic spinach "factory," a completely controlled environment for growing spinach, produces on 1 acre of floor space what it takes 100 acres of fields to produce. Expenses, especially for electricity, are high, however, and the spinach produced costs about four times as much as washed California field spinach, the spinach commonly sold throughout the United States.

Which of the following, if true, best supports the projection that the spinach-growing facility near Chicago will be profitable?

(A) Once the operators of the facility are experienced, they will be able to cut operating expenses by about 25 percent.
(B) There is virtually no scope for any further reduction in the cost per pound for California field spinach.
(C) Unlike washed field spinach, the hydropoincally grown spinach is untainted by any pesticides or herbicides and thus will sell at exceptionally high prices to such customers as health food restaurants.
(D) Since spinach is a crop that ships relatively well, the market for the hydroponically grown spinach is no more limited to the Chicago area than the market for California field spinach is to California.
(E) A second hydroponic facility is being built in Canada, taking advantage of inexpensive electricity and high vegetable prices.

Why D is wrong/right here? Please explain

A little of maths will help us here!!


Why not D?? Let us simulate a hypothetical case here.

1. Stem says hydroponically grown spinach (HPS) is costlier to produce than California field spinach, but still HPS will be profitable.

But D never gives a guarntee that the revenues made in the foregin markets will certainly exceed the "overheads" created by HPS.
What if HPS caters only to few dozens of customers through out the globe??

Let us come to C

(C) Unlike washed field spinach, the hydropoincally grown spinach is untainted by any pesticides or herbicides and thus will sell at exceptionally high prices to such customers as health food restaurants.

I wont say C is very correct answer. Still it has loopholes!!

Again we can question C whether the revenues generated by exceptional pricing can bridge the gap between the "HPS price and field spinach price"

IMO none of the answers are great!!

Thanks for the explanation. Here for C: we can argue it only caters to health conscious customers?
Would that be reasonable to reject option C?

On the other hand, consider if the Chicago plant grew spinach at a higher rate then would D become correct? (Since both have the same market, yet the Chicago plant grows spinach faster and hence would be able to sell more?

Please explain.

albatross86 wrote:Additional Cost : Electricity.
Product sells for 4 times what washed California field spinach sells for.

The facility is profitable. What supports this?

A good way to rule out answer choices in these question types, is to ask the question - So what? or Who cares about that?

A. Cut operating expenses by 25%. How do you know if this will ensure profitability?

B. The price for field spinach will remain as it is. So what?

C. This tells us our product will sell for high prices and has a specific market which it can cater to. These directly support the projection that it will still be profitable.

D. Both types of spinach can be sold everywhere. So what? The hydroponic spinach may still be unprofitable thought it CAN be sold everywhere.

E. We're talking about THIS facility. Who cares about another one?

Pick C.

Sure.

Even if it only caters to health conscious customers, C directly provides evidence that we can sell the product at a high price which indicates that the high costs are justified and profitability will be possible.

D only says the market is not limited - it says nothing about whether people are willing to pay the higher price for this spinach. Being able to produce more does not mean you will sell more or if you will recover your costs.

The key here is the higher costs, higher price and therefore establishing the willingness to pay, which only option C throws light on. Hope that helps.

Thanks a lot!

albatross86 wrote:Sure.

Even if it only caters to health conscious customers, C directly provides evidence that we can sell the product at a high price which indicates that the high costs are justified and profitability will be possible.

D only says the market is not limited - it says nothing about whether people are willing to pay the higher price for this spinach. Being able to produce more does not mean you will sell more or if you will recover your costs.

The key here is the higher costs, higher price and therefore establishing the willingness to pay, which only option C throws light on. Hope that helps.