Q21 - In a recent study, researchers collected

[mshinners]

Question Type:
Explain a Result EXCEPT

Stimulus Breakdown:
Expected: The wholesale price would match the suggested wholesale price.

Unexpected: The wholesale price at bulk wholesalers was 60-80% lower than the suggested wholesale price.

Answer Anticipation:
Since this is an EXCEPT question, there are many, many potential explanations. I'd head straight into the answers, looking to eliminate anything that would explain why the bulk wholesalers are lowering prices below the suggestion.

Correct answer:
(B)

Answer choice analysis:
(A) Explains, so eliminate. A price war would drive prices down.

(B) Out of scope comparison. The situation in the stimulus revolves around the common drugs, so the other drugs are out of scope. Even if the common ones have a lower suggested price, it doesn't explain why they wholesalers are selling below that suggested price.

(C) Explains, so eliminate. The study was done on current prices, and that data was compared to an annual book. Wild fluctuation could explain the discrepancy. For this answer, I'd probably head back to the stimulus to confirm the timeline.

(D) Explains, so eliminate. This answer suggests the suggested prices are inflated, which would explain why they're cheaper in reality.

(E) Explains, so eliminate. The guidebook is for small quantities; the study was done on bulk wholesalers. This answer relies on knowing about bulk discounts. For Explain a Result questions, and only for these, you don't need an airtight answer, and they often allow for real-world assumptions to be brought in.

Takeaway/Pattern:
1) Make sure that the answer is talking about the right elements. Especially when the situation involves a comparison, the answers will often shift to comparing different quantities.
2) If an answer relies on an assumption that you know to be true in the real world, for this question type, you can generally make that assumption.

#officialexplanation

[YuriJ257]

I don't get the explanation for D. Can someone expand on how D is talking about inflated prices? Thank you.

[ohthatpatrick]

(D) is a bit weird.

If you've ever seen the "List Price" on instruments at music stores / music catalogs, you know that the List Price for a guitar will be like $800 and then the HOT BARGAIN PRICE in the store is like $595.

Same deal for car dealership, where the Manufacters' Suggested Retail Price (MSRP) is often a couple thousand higher than the sticker price you see on the lot.

It's a common business practice to make the "list price" artificially high so that businesses then have plenty of room to "come down" and make the customer feel like she's receiving a bargain.

So the idea with (D) is that if these prices in the guidebook allow fro SUBSTANTIAL profits, then there's plenty of room for the actual "current prices" to be lower, while still providing the wholesalers with 'decent / acceptable' profits.

If you're looking at (D) and thinking, "Okay, so the prices are set so that pharm companies can make substantial profits .... how does that explain why the current prices are much lower?", then you would basically have to think, "Okay, so there was enough headroom on these guidebook prices that wholesalers could lower them considerably to what the current prices are without losing profitability entirely".

It's not super great, but it can do SOMETHING to help explain, whereas (B) does zilch.

Hope this helps.

[YuriJ257]

Wow, that's such a thorough explanation!!! Thank you so much!! I've been stuck on this problem forever.