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Because of a rare type of fungus that killed off many cacao

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Because of a rare type of fungus that killed off many cacao [#permalink]  12 Jul 2018, 07:18
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Because of a rare type of fungus that killed off many cacao trees in Brazil, there was an unusually meager harvest of cacao beans this year. The wholesale price of cocoa solids and cocoa butter has increased significantly and is unlikely to fall in the foreseeable future. As a result, the retail price of chocolate is certain to increase within six months.

The answer to which of the following questions would provide information relevant to evaluating the argument above?

(A) Has the price of cocoa solids and cocoa butter remained steady during other periods of poor harvest?
(B) Are consumers willing to spend more for chocolate?
(C) Have the prices of other ingredients in chocolate decreased recently?
(D) What percentage of cacao trees in Brazil were affected by the fungus?
(E) Can the fungus be eliminated within the next six months?
[Reveal] Spoiler: OA

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Re: Because of a rare type of fungus that killed off many cacao [#permalink]  19 Oct 2018, 21:37
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Re: Because of a rare type of fungus that killed off many cacao [#permalink]  31 Oct 2018, 18:19
I chose to mark B. Can anyone explain why it is C
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Re: Because of a rare type of fungus that killed off many cacao [#permalink]  06 Dec 2018, 09:51
Quote:
As a result, the retail price of chocolate is certain to increase within six months.

Because we are trying to evaluate the above argument. We're not evaluating whether or not consumers are willing to pay more for chocolate. That's how I saw it.
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Re: Because of a rare type of fungus that killed off many cacao [#permalink]  07 Dec 2018, 13:52
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Sawant91 wrote:
I chose to mark B. Can anyone explain why it is C

Here is the question:

Quote:
Because of a rare type of fungus that killed off many cacao trees in Brazil, there was an unusually meager harvest of cacao beans this year. The wholesale price of cocoa solids and cocoa butter has increased significantly and is unlikely to fall in the foreseeable future. As a result, the retail price of chocolate is certain to increase within six months.

The answer to which of the following questions would provide information relevant to evaluating the argument above?

(A) Has the price of cocoa solids and cocoa butter remained steady during other periods of poor harvest?
(B) Are consumers willing to spend more for chocolate?
(C) Have the prices of other ingredients in chocolate decreased recently?
(D) What percentage of cacao trees in Brazil were affected by the fungus?
(E) Can the fungus be eliminated within the next six months?

When we approach a "Most Useful to Know in Order to Evaluate" question such as this we can begin as we would for any strengthen or weaken question. That is, we need to identify the conclusion and the evidence and even perhaps look for any gap in logic that we might find.

The conclusion is "As a result, the retail price of chocolate is certain to increase within six months." And the evidence is "The wholesale price of cacao solids and cocoa butter has increased significantly and is unlikely to fall in the foreseeable future."

So what is being indicated in this argument is that "Because the wholesale price of cacao beans is up then the retail price of chocolate will soon increase."

Now if we quickly think about this several possible gaps in this logic emerge: several reasons why the increase in the wholesale price of cacao beans may not increase the retail price of chocolate.

1) The chocolate maker might absorb the costs. The wholesale price can go up temporarily and if the manufacturer expects it to go back done soon that company may decide not to pass on the increase to the consumer in the form of the retail price.

2) The chocolate maker may have a stockpile of cacao. This is less likely with a food commodity as opposed to more durable goods like cars or appliances, but it may be the case that the manufacturers have more than a six month supply of cacao and are therefore relatively insulated from this year's poor harvest.

3) Other costs associated with the production of chocolate may go down. For example, labor costs, energy costs, or the cost of other ingredients may decrease and offset the increase in the cost of beans.

You do not have to come up with these specific gaps in logic. All that you need to do is to understand that the thing that could weaken this argument is that something might come between the increase in the wholesale price of one component of chocolate and the retail price of the chocolate. Any answer choice that would help you to know if this increase will be passed on to consumers or not passed on is what is most useful to know in order to evaluate.

That is why we have answer choice C here. If we know whether the price of other ingredients has decreased we will know about 1 of the possible factors involving this retail price increase. Clearly if the price of other ingredients has decreased then the overall ingredient cost may stay the same even though cacao beans are more expensive. In this case the retail price might not go up.

If the price of the other ingredients has not decreased then it is more likely that the increase in the cost of cacao beans will be passed on the to the consumer.

Other answers: Choice B is an interesting answer. If consumers are not willing to pay more than the price increase might not work out. However, if the cost of materials is up the manufacturer may have no choice but to increase the retail price of chocolate anyway.

Choices A and D are just unnecessary facts. It does not matter what happened in the past nor what percentage of trees are impacted. Those things come BEFORE an increase in the cost of cacao beans and that increase has already occurred.

Choice E is important. If the fungus cannot be eliminated quickly there will surely eventually be a price increase. But over the time frame mentioned in this question - the next six months - it appears that the yearly harvest is already in and it was a bad harvest. So Choice E is not as relevant as C.

Hope it helps!
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Re: Because of a rare type of fungus that killed off many cacao [#permalink]  09 Dec 2018, 07:15
I thought it would be A, if the prices have remained steady in the past, it is possible it will remain steady now too.
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Re: Because of a rare type of fungus that killed off many cacao [#permalink]  09 Dec 2018, 09:15
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kruttikaaggarwal wrote:
I thought it would be A, if the prices have remained steady in the past, it is possible it will remain steady now too.

What you say does seem to make sense. If in other poor harvests the price has not moved then why should it move this time?

But you must read this very carefully, which price does choice A say has remained steady? The price of the beans, right?

However, the point is that according to the stimulus the price of cacao beans has already increased. So it does not matter what we expect or what happened in the past. If Mexico beat Brazil in soccer yesterday then it does not matter that Brazil has always defeated Mexico in the past. The likelihood of Mexico winning is 100% since they have in fact won.

That is why I indicated that choices A and D are basically irrelevant. These factors speak to the likelihood of a increase in the price of the cacao - but since that increase has, in fact, occurred then the likelihood is now 100%!

Does that help?
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Re: Because of a rare type of fungus that killed off many cacao [#permalink]  15 Dec 2018, 11:17
Final Price is most often affected by the costs associated with producing a goods. In the case of chocolate, besides the price of the cacao, which is the main ingredient, we should alto take into consideration sugar, butter, milk,... supplies too. Hence, C seems most reasonable to me.
Re: Because of a rare type of fungus that killed off many cacao   [#permalink] 15 Dec 2018, 11:17
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