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## GMAT Prep: Home Decorator Magazine

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i_have_no_cool_username Just gettin' started!
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GMAT Prep: Home Decorator Magazine Thu May 17, 2012 11:55 pm
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• Lap #[LAPCOUNT] ([LAPTIME])
Because postage rates are rising, Home Decorator plans to maximize its profits by reducing by one half the number of issues it publishes each year. The quality of articles, the number of articles published per year, and the subscription price will not change. Market research shows that neither subscribers nor advertisers will be lost if the magazine's plan is instituted.

Which of the following, if true,provides the strongest evidence that the magazine's profits are likely to decline if the plan is instituted?

a) With the new postage rates, a typical issue under the proposed plan would cost about one-third more to mail than a typical current issue would.

b) The majority of the magazine's subscribers are less concerned about a possible reduction in the quantity of the magazines' articles than about a possible loss of the current high quality of the articles.

c) Many of the magazine's long-time subscribers would continue their subscriptions even if the subscription price were increased.

d) Most of the advertisers that purchase advertising space in the magazine will continue to spend the same amount on advertising per issue as they have in the past.

e) Production costs for the magazine are expected to remain stable.
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Help, please? I would like to hear the reasoning behind the correct answer (I will reveal the OA later on). Thanks!

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Gaurav 2013-fall Really wants to Beat The GMAT!
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Fri May 18, 2012 3:57 am
Because postage rates are rising, Home Decorator plans to maximize its profits by reducing by one half the number of issues it publishes each year. The quality of articles, the number of articles published per year, and the subscription price will not change. Market research shows that neither subscribers nor advertisers will be lost if the magazine's plan is instituted.

Which of the following, if true,provides the strongest evidence that the magazine's profits are likely to decline if the plan is instituted?

a) With the new postage rates, a typical issue under the proposed plan would cost about one-third more to mail than a typical current issue would. (may not decline profit)

b) The majority of the magazine's subscribers are less concerned about a possible reduction in the quantity of the magazines' articles than about a possible loss of the current high quality of the articles. (out of scope)

c) Many of the magazine's long-time subscribers would continue their subscriptions even if the subscription price were increased. (opposite)

d) Most of the advertisers that purchase advertising space in the magazine will continue to spend the same amount on advertising per issue as they have in the past. (hmm looks like a contender since ads will be less since issues are less, so money generated will be less)

e) Production costs for the magazine are expected to remain stable.(will not affect profit)

So, D

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Fri May 18, 2012 4:57 pm
Choice (A) actually ensures profitability. It strengthens the conclusion. If the no. of issues are halved and the postage costs one third more, then we are definitely in the 'positive' as far as overall profitability is concerned.

(D) is the correct answer here.

Hope this helps!

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