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• 2 Likes

  BlindReviewer Alum Member

  January 2019 855 karma

  Thanks for bringing this question up -- I got it wrong so it's good to review! I'll try to give the explanation a shot.

  Starting with the stimulus, let's say that the Scorpio Miser costs 200, the regular Scorpio costs 100, and gas costs 5 dollars a gallon. The Scorpio Miser, however, can get 10 miles per gallon, while the regular Scorpio only gets 5 miles per gallon. Since the Scorpio Miser cost 100 more than the regular Scorpio, we need to save 100 on gas for it to break-even. So for every 10 miles I drive with my Scorpio Miser, I'm saving 5 dollars. If I want to drive 10 miles with a regular Scorpio, I'd be paying 10 dollars for gas, but if I want to drive 10 miles with my Scorpio Miser I'd be paying 5 dollars. Therefore, if I'm saving 5 dollars every 10 miles, and I need to save 100 dollars, then I have to drive 200 miles at least, before this car starts to pay off.

  When I was going through this I was pretending it was a timed situation so I didn't really figure out the flaw and just tried to use the answer choices (definitely would skip this question on a real test and come back later). You can eliminate A,D, and E based on their conclusions, and I chose B because it seemed the most similar.

  But the flaw in the stimulus is that if gas is cheaper, say at 1 dollar a gallon, I'd have to drive further for my savings to be worth it. Because now, for every 10 miles I drive with my Scorpio Miser, I'm only saving 1 dollar. I'd have to drive 1000 miles to save 100 dollars, which makes it worse for me.

  C captures this exactly -- it just LOOKS different. B is a bit confusing, and if someone wants to weigh in on that, that would be appreciated. One big problem I see with B is that it isn't about compensation/breaking-even -- it's just about justifying the choice of one freezer. The second thing is that it's not about rates -- it's not as if the cost of electricity changes the efficiency of selling high profit foods. Whereas gas or wages saved is a unit of the efficiency of the machines considered, in the case of freezers, electricity isn't really factored into the efficiency of selling food. It actually makes sense that if electricity is cheaper, you'd have to sell less food.
• blackberry Alum Member

  January 2019 218 karma

  Hey, you're awesome! Thanks so much for the exhaustive response. I went through it with the numbers you provided, and it makes so much sense. I also chose B during PT, and yes, and I agree with you that the 'justify' part of it does not parallel.
• 1 Like

  Logic Gainz Alum Member ⭐

  January 2019 edited January 2019 700 karma

  We can ignore the math - sort of - and get this question right!

  I think the main thing to focus on is how the change in rate (regardless of whether we're talking about gas price or electricity rate) affects us, assuming we're using the "better" product. In the stimulus, let's assume we're using the upgraded efficient vehicle that costs more. In a.c. B, let's assume we're using the better freezer. Lastly for C, let's assume we're using the Roadmaker.

  In the stimulus, if we're using a fuel-efficient car, that car is as valuable on a unit-by-unit basis as the price for a gallon of gas. So if gas prices are high and we have to visit the gas station less often, we get to keep more money in our pockets. Our savings go up, and therefore the value of our fuel-efficient car goes up because we're saving more money by using it. If gas prices drop and we're only saving a tiny amount of money per gallon, then the value of the car goes down. That's why we have to drive more to reach the same amount of saving. If we're saving less due to lower gas prices per mile driven, we'd have to drive more to reap the same saving amount. The drop in rate in this case, hurts us. Keep this relationship of being hurt by the drop in rate in mind because that's what differentiates C from B.

  B and C are similar, but they are dissimilar in how we, the consumer of the better product, are impacted. We need the rate change to hurt us, not help us and B's rate change helps us. That's not what we want in the context of this parallel question. If we are using the better product as we are in B (the better freezer), which uses up more electricity, then a drop in electricity rate would help us. The conclusion is actually spot on.

  In C, the better Roadmaker vehicle uses less staff, so it's value is derived from the amount of wages being saved per worker, since we don't need to hire as many people. However, if labor is dirt cheap, then the value of using a product that doesn't require as much labor lessens, since its value, again, is derived from the per worker cost saved from not having to hire that worker. We're saving less in a world with cheap labor. It's conclusion also gets this wrong, concluding the opposite of what actually happens, just like the one in the stimulus does.
• FlashLSAT Alum Member

  April 2019 293 karma

  Stimulus Explained: The Stimulus lets us know that we have the option of buying two cars the Scorpio Miser (SM) or the standard Scorpio (SS). The difference between the two is that one has a high-efficiently ran engine and therefore is more expensive than the other one. The stimulus lets us know that the difference in purchase price can be made up by savings on fuel AFTER driving 60,000 miles. Another key point is that it says at CURRENT fuel prices. The last point and where we find our flaw is that the stimulus assumes “...if fuel prices fell, it would take fewer miles to reach the break-even point”. That is to say the author believes he will save more quickly if fuel prices are lowered. Believing he will gain more mileage usage with lower fuel prices.
  The flaw is simple. By lowering fuel prices it will actually take him longer to make up the purchase price because he will have to drive more miles.
  For example. Imagine if the SM and SS were paying the same rate for fuel but making fewer trips to the gas station.
  SM= $50 for gas gets 50 Miles
  SS= $50 for gas gets 30 Miles
  Using these numbers above as an example we can show why he does not save more quickly with lower fuel rates. If both cars were to go on a trip that was 150 miles away. The SM trip would cost $150 dollars and the SS trip would cost $250 being that the SM would need to refill 3 times and the SS would need to refill 5 times. The savings here are $100.
  Lets say if fuel prices were to drop to a point where only $40 dollars gets 50miles now. The same trip would now cost the SM 120 and the SS 200 with a savings of only $80. Lower rate of fuel lowers savings which will increase the amount of miles needed to make up the purchase.
  This is a major flaw which im not sure has a name but it is very common in every d