Hello everybody,
I have recently bought PrepLounge's PST mock number 1. I went through it as a trial (first PST test I am taking, haven't seen the McKinsey official mocks), and have a number of questions about it, as I do believe there are a number of mistakes and inconsistencies in it. I would therefore need a clarification about some questions. Specifically, I need some help with the following:
Q3: Ceteris paribus, options b, c and d are all correct. Indeed, if costs are the same and revenues rise, then profits will rise. Though options c and d will result in increasing revenues, if we assume costs stay the same, they will also result in increased profits. Option b acts directly on a constituent of profits (P = R - C, it acts on C) so in the context of the mock this may be the "best" answer. Is this how candidates should think about these kind of problems (that is, what is the "best" answer)?
Q6: This is actually a really long question for 2 minutes or slightly more.
Q8: I did answer a (the correct one), but I do believe c could be viable as well. The answers exclude c by saying that the firm does not offer purchases on account, but nowhere is it stated that rival firms do offer purchases on credit. The "only" bit of option c does not imply such a thing ("only" does not necessary refer to firms operating in the same industry - perhaps they are referring to online payments in general, where one could be buying products on credit).
Q10: The objective of the firm is to keep profits stable and be compliant with EU regulations. Option a could do both, so it is not the correct solution. However, options b, c and d all have some flaws, and I don't see why b is the correct solution. Option b would move the firm towards compliance, though will most likely lower profits (it would surely decrease revenues and costs, though in practice it would probably lower revenues more than costs and hence lower profits as a result). Also, if the firm operates hundreds of nuclear plants, shutting one down won't affect profits much. Option c in nonsensical, as the initial text clearly states that investing in clean energy will prove impossible for the firm (last paragraph, page 6). Moreover, it is not given that such an action will result in profits for the firm at all. Option d will move the firm towards compliance, but it is not guaranteed that such an action will prove to be profitable either (it depends on the elasticities involved, which are not given). Therefore, I don't understand why b is the correct answer (the reasoning given in the answers is very vague and is in my opinion simply not sufficient to exclude options c and d).
Q14: Options a and d are clearly wrong. I understand why b is the preferred answer, but ironically c is, in a way, a form of efficiency (more output - in this case price - for the same input). This one is a pretty minor remark, and can be ignored :)
Q15: The answer is actually wrong. The discount is 15%, not 25% as implied by the answers. The correct answer is 63%, which is not a given option.
Q18: The text above the question has GWH under point 4 instead of GWh. The correct terminology is GWh. GWH is not scientifically correct and is not used throughout the paper (the other bits use GWh correctly). This has been very confusing during my trial, as I did not think of it as a unit of measure, but as some sort of segmentation of clean energy (which has proven very bothersome under time pressure!).
Q19: Answers b and c both encompass all the markets geographically and encompass the financial side of the case as well. It is unclear to me why c is right and b is wrong (by reading the answers).
Q24: The product comprises milk and a topping. Most likely, the toppings are more expensive than the milk. The problem is that the yoghurts are more expensive as a result of an increase in the price of milk. By lowering the % of milk we are not combating the increase in price in the product. Indeed, we are making it worse. Justifying it by saying that perhaps the price of the toppings is lower than the price of milk would be analogous to invalidating Q17 by requiring candidates to know that Norway is not an EU member state (though ironically most EU subsidies do apply to EEA member states as well...). This is, in my opinion, common knowledge (fruits are more expensive than milk!) and should not be used as a way to imply the correct answer.
Sorry for appearing sassy, but I was honestly puzzled by some answers!
Regards! :)
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