PrepTest 115, Section 4, Question 10
The wholesale price of one bottle of Veritas(88 more words not shown)
If the statements above are(15 more words not shown)
- AThe number of(14 more words not shown)
- BEach bottle of(19 more words not shown)
- CThe cost to(18 more words not shown)
- DThe aggregate profit(20 more words not shown)
- EThe cost of(19 more words not shown)
Reading the argument
The winegrower gets the same amount for each bottle but pays more to produce it. That leaves less profit per bottle. The cork doesn't have to be the biggest expense for its increase to matter: if every other cost stays fixed and the selling price stays fixed, even one higher cost reduces what's left over.
Be precise about whose price we're using. The wholesale price is what the winegrower receives, not necessarily what a customer pays in a store. A retailer could change its own price without changing this calculation.
And don't rush from less profit per bottle to less profit overall. What if the winery sold ten bottles in 1991 and ten million now? Those are hypothetical quantities, but they show how selling more bottles could offset a smaller margin on each one. We aren't given the quantity sold.
What we’re looking for
For the must-be-true question, my prediction stays at the level the facts establish: each bottle now earns the winegrower less profit. Total sales and total profit remain open.
Working the answers
- A
Keeping the price constant doesn't mean keeping the number sold constant. The winery might sell more bottles, fewer bottles, or the same number. None of the information about the price and production cost decides that separate quantity.
- BCorrect
Profit per bottle is the wholesale price minus production costs. The wholesale price hasn't changed. All the costs other than corks have stayed the same, and the corks cost more. So the total cost per bottle has risen while the money received per bottle has not. The difference between them—profit per bottle—must be smaller.
The brand can still be profitable. “Less profit” doesn't mean a loss; it means less money remains from each sale after paying those costs.
- C
The winegrower pays more for corks, but we don't know why the cork maker charges more. Perhaps the cork maker's own costs rose. Or perhaps those costs stayed the same and the cork maker raised its price to earn more. A higher price paid by one business doesn't establish a higher production cost for its supplier.
- D
“Aggregate profit” means total profit from all the bottles sold. That depends on both profit per bottle and the number of bottles. A sufficiently large increase in sales could produce more total profit despite the smaller amount earned on each bottle. We know one part of the calculation, not both.
- E
Nearly doubling a small cost can still leave it below a larger cost that hasn't changed. A cork that rose from ten cents to nineteen cents would still cost less than a one-dollar glass bottle. Those figures are illustrative; the passage doesn't supply the actual amounts. It gives a change in cork cost, not a ranking of cork cost against bottle cost.
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