Spinach factory!!

Here is the question in a readable presentation. Please take the time to correct for line breaks. The original post is hard to read.

"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 a 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 hydroponically 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.

Here is a great discussion of this topic from Karishma, a Veritas instructor and one of the top experts on GMAT Club. Here is what she had to say:

We need to explain how spinach-growing facility near Chicago could be profitable. Note that the argument tells us that the production of factory spinach costs 4 times as much as field spinach. Say field spinach costs $1 per pack to produce and factory spinach costs $4 per pack to produce. To be profitable factory spinach will need to be sold at $5 per pack but field spinach can be easily sold at $1.50 per pack. So it seems that no one will buy the factory spinach because it will be way too expensive relative to the field spinach.

Also note that productivity per acre has no role to play here. We have been given that factory spinach production costs 4 time more. So it includes the cost of land and resources. When you sum it all up, you see that cost per packet for factory spinach is 4 times as much.

Let's look at the options now. We need one which can tell us why people may be willing to buy the much more expensive factory spinach.

(A) incorrect

A 25% cut and that too only in operating costs (not in the fixed costs) will have no meaningful effect. The cost of production might go down to $3.5 per pack. We will still need to sell it at a much higher cost that field spinach.

(B) incorrect

Out of scope. We don't even know if there is any scope of cost reduction in factory spinach. And even if there is, we don't know how much. Also scope of reduction and actual reduction are very different things.

(C) correct answer.

Now here is a reason why people may buy the $5 per pack spinach. This may mean that the factory may be profitable after all.

(D) incorrect

The range of the market is not important. We can put the spinach in stores all across the world; the point is will people buy it?

(E) incorrect.

Out of scope. We are worried about this factory only.

Answer (C)

Let me know if you still have questions!

David

I choose letter "C"

The hydroponic spinach as I know it receives more oxygen at the roots. Because of this only a small amount of fertilizer is required. I think the factory is more profitable. Is my reasoning correct?