Question

1. A newspaper headline claims: "Apple spends far less on Research & Development
than any of its rivals." Further into the story, the reporter writes that Apple spends a
paltry 2% of revenues compared with 14% at Google and Microsoft.
a. What is the mistaken assumption here?
b. Why is that assumption incorrect?
c. Is there a situation where the headline is still correct?

Answer 1

Answer:

Step-by-step explanation:

a)

The mistaken assumption is that Apple spends "far less" on Research and Development than any of its rivals.

b)

The assumption is incorrect because it took cognizance of the percentage used, and not the actual money spent. In truth, Apple generates far more income than the other two rivals. With Apple generating over $100bn in the said time span, and Google generating $37bn. At the end of the day, Apple spends $2.1bn on Research and Development, while Google spends $5.3bn on the same. This is quite close than the quoted distance of 14% - 2%

c)

Yes, I think so. But only when the 3 companies generate almost the same revenue.

Answer 2

Based on the description of the headline given in the scenario, the solution to the problems posed are :

A.)

The mistake in the assumption is that, the headline focused just on the percentage of the revenue made by each company that is spent on R&D.

B.)

The assumption is incorrect because, the revenue generated by the companies aren't the same. Hence, making comparison based on the percentage alone is incorrect.

C.)

The headline may be correct only when the revenue generated by each company is the same.

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