- PowerScore Staff
- Posts: 215
- Joined: Jul 06, 2021
- Wed Jul 07, 2021 4:38 pm
#88561
Hi Erica,
This is one of those gotcha type questions. The key is that answer choice C is talking about profits! Profits are, basically, what you get from sales after subtracting all the costs. (There's a specific formula, but we're not in business school right now). Basically, the idea that profits have increased doesn't actually do anything to explain the sales numbers; sales occur before profit is even considered. Now, you might have thought that the free shipping would have potentially decreased profits, since this could add to the company's cost. However, the conclusion is purely focused on sales, prior to any consideration of costs, overhead, etc., and so as such, any reference to profit would be irrelevant to the argument itself.
To illustrate this, let's imagine you're selling lemonade at a lemonade stand. You start out selling one glass for one dollar. However, sales are very slow. Thus, you decide to lower the price to 50 cents. Sales pick up significantly! Now, if you're buying the lemons for 40 cents a pop, then I'm probably not making much profit on each glass of lemonade (assuming on lemon is required to make one glass); however, the increase in sales increase the gross profits and thus makes me a happy lemonade sales person!
Hope this helps.
This is one of those gotcha type questions. The key is that answer choice C is talking about profits! Profits are, basically, what you get from sales after subtracting all the costs. (There's a specific formula, but we're not in business school right now). Basically, the idea that profits have increased doesn't actually do anything to explain the sales numbers; sales occur before profit is even considered. Now, you might have thought that the free shipping would have potentially decreased profits, since this could add to the company's cost. However, the conclusion is purely focused on sales, prior to any consideration of costs, overhead, etc., and so as such, any reference to profit would be irrelevant to the argument itself.
To illustrate this, let's imagine you're selling lemonade at a lemonade stand. You start out selling one glass for one dollar. However, sales are very slow. Thus, you decide to lower the price to 50 cents. Sales pick up significantly! Now, if you're buying the lemons for 40 cents a pop, then I'm probably not making much profit on each glass of lemonade (assuming on lemon is required to make one glass); however, the increase in sales increase the gross profits and thus makes me a happy lemonade sales person!
Hope this helps.
