Self-study
Complaints that milk bottlers take enormous markups on the bottled milk sold to consumers are most likely to arise when least warranted by the actual spread between the price that bottlers pay for raw milk and the price at which they sell bottled milk. ███ ██████████ █████ ████ ███ ████████████ █████ ██████ ███ █████ █████ █████████ ████ █████ ██████ ███████ ███ ██████ █████ ██ ███ ███ ████ ████ ████████ ███ ████ █████ ████████ ████ ███ ████████ █████ ██ ███████ ███ ███████████ ███████ ███ ████████ ████████ █████████████ ██ ███ ██████ ██████ ████ ███ ████████ █████ ██ ████████ ████████ ███ ███████ ███ █████████
Identify a Statement that Must Be True
Today we're learning about the economics of milk bottling. To correctly determine which answer choice must be true, we should start by fully understanding the facts given in the stimulus. This is what we know:
(1) consumer complaints about milk bottlers' markups tend to be most common when milk bottlers actually have a lower margin;
(2) complaints occur when the price of bottled milk increases;
(3) increases in the price of bottled milk are usually because of increases in the price of raw milk;
(4) when the raw-milk price is rising, milk bottlers have the smallest proportional markup;
(5) when the raw-milk price is falling, milk bottlers have the largest proportional markup.
The correct answer will propose a statement that necessarily must be true as a result of the facts we're given. This could be an inference made from taking two or more facts together, or it could be a logical consequence of a single fact. In either case, we can safely eliminate any options that rely on new information not given in the stimulus, or that otherwise could be false.
9.
If all of the statements █████ ███ █████ █████ ███ ██ ███ █████████ ████ ████ ██ ████ ██ ███ █████ ██ █████
a
Consumers pay more ███ ███████ ████ ████ ████████ ██████ ███ ███████ ████ ████ █████ ██████ ███ ███████
The stimulus only discusses the proportional markups on bottled milk at different times. We don't have enough details on the absolute price consumers pay—(A) could be true, but it could be false.
b
Increases in dairy ██████████ ████ ██ █████████ ████ ███ █████████ ███ ██████ ██ ██ ██████████
We don't know anything about dairy farmers' costs and pricing decisions, only about how milk bottlers respond to raw-milk price changes. (B) brings in new information, so we can't say it must be true.
c
Milk bottlers take █████████████ ███████ ███████ ██ ███████ ████ ████ ███ █████ ██ ███ ███ ██ ████████ ██████ ████ ████ ██ ██ ████ ███ ██ ████████ ███████
The stimulus only tells us about prices when the raw-milk cost is rising or falling. We don't have any information about milk bottlers' pricing decisions when raw-milk costs are stable, so (C) could be true or could be false.
d
Milk bottlers generally ██ ███ ███████ ██ █ ████████ ██ ████████ ██████ ██ ████████████ ███████████████ ████████ ███ █████ ██ ███ ███████ ████ ████ █████
According to the stimulus, milk bottlers have a higher proportional markup when the raw-milk price is falling. If they immediately lowered prices proportionally to the raw-milk price, this would be impossible. That's why (D) must be true: it's a logical consequence of a fact in the stimulus.
e
Consumers tend to ████████ ████ █████ ███ █████ ████ ███ ███ ███████ ████ ████ █████ ███████ ███ ███████ █████ ████████ ████████
We don't know anything about dairy farmers' profits, just about milk bottlers' profits. (E) relies on new information about dairy farmers; the stimulus doesn't require (E) to be true.