QUESTION TEXT: In a recent study, researchers collected current…
QUESTION TYPE: Paradox – Except
PARADOX: Researchers found that wholesale prices for bulk orders of the 300 most common pharmaceuticals were 60-80% below the wholesale price suggested in a popular, independent drug price guidebook.
ANALYSIS: I call these questions paradoxes for consistency, but sometimes there’s no paradox. That’s the case here: there’s just a situation to be explained. To solve these questions, you must do two things:
- Clarify the facts of the situation.
- Keep an open mind and look at the situation. Think about how the answer affects the facts.
That sounds simple, but many people don’t do it! In my summary above I listed all the relevant facts. If you were missing some, you could miss an answer. Note that you need to use a bit of outside common sense about bulk discounts on this question.
The wrong answers will all help explain. The right one might make the situation more confusing, but probably it will just explain nothing.
- A wholesaler price war certainly helps explain lower prices.
(The price war could have happened after the guidebook was published, but before the study.)
- CORRECT. This explains nothing. The question is about the difference between the listed price and the bulk wholesale price of the same drugs (i.e. is the bulk price of drug A lower than the list price of drug A).
Differences in price between drugs are irrelevant.
- The guidebook is an annual guidebook. If prices fluctuate monthly then that could explain why prices were lower at the time of the study.
- If wholesale prices allow large profits, then there’s space to offer big discounts. The study looked at bulk orders – buying in bulk is usually a good reason for a discount.
- Similar to D. The study looked at bulk orders. Bulk orders are usually significantly cheaper than individual orders.
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