PrepTest 101

Incorrect. This answer explains the dip in sales despite the lower price by bringing up overall market trends. Soda sales overall were down, explaining Foamy Soda's experience.

Incorrect. If other brands lowered their prices even more than Foamy did, those brands may have been the ones that were purchased instead of Foamy. After all, why go with Foamy at $1.25 when Fizzly will cost you only a buck?

Correct. Argument or Facts:
Facts

Question Type:
Bizarro Paradox

Stimulus Summary:
Goal - Increase sales during the busy summer months
Approach - Lower prices
Outcome - Lowered sales

Answer Anticipation:
Ah, economics! You rear your ugly head on the LSAT again. While technical knowledge isn't required for the LSAT, there are some simple relationships in a few disciplines that the LSAT expects you to be generally familiar with. Here, the paradox is related to one of them—as something's price goes down, the expectation is that sales will go up. After all, if sales are at a certain level at one price, then why would anyone stop buying it at a lower price? And a few other people might buy it because it's cheaper.

Here, however, Foamy Soda saw the opposite effect—as they lowered the price of their soda, sales went down over the summer. Since this is a Bizarro question, we're looking to eliminate four answers that explain this. Anything that explains how lower prices on sodas results in lower sales, or brings up another reason for a dip in sales (e.g., maybe soda sales overall are down because a widely publicized report came out on the negative health effects of drinking them) will resolve this paradox, so let's get to the answers.

Answer Explanation:
The stimulus is about sales, not profit. As such, the cost of production is out of scope, and this answer is correct in this Bizarro Paradox question.

Key Takeaway:
This question highlights two general economic principles that you're expected to know for the LSAT. The first is that lowering the price is expected to increase demand/sales. The second is that production costs are related to profits, not sales.

Incorrect. If Foamy had production issues and their sodas weren't in stores, that would explain a dip in sales.

Incorrect. This answer establishes that the overall demand for soft drinks was down, thus explaining why Foamy saw declining sales despite the lowered price.