Contrary to a former estimation made by the head of the tourism industry of Country X, there was no rise in the number of tourists or in the average sum of money spent by each tourist in the past year. There was, however, a steep increase of almost 20 percent in profits from the tourist industry in that time span.
Which of the following statements, if true, help to explain the rise in profits?
A) The tourists last year came mostly from developed countries, whereas previously most tourists came from developing countries.
B) A rise of 20% was estimated for last year in the amount of tourists expected to frequent Country X.
C) Following a long strike, employers in the tourism industry were forced at the beginning of last year to raise salaries by 20%.
D) A change in the foreign ministry of Country X, which was authorised at the beginning of last year, has made it much easier for tourists to enter the country.
E) A general rise in unemployment throughout the country enabled employers in the tourism industry to significantly cut salaries at the beginning of last year.
OA E
Source: Economist Gmat
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Contrary to a former estimation made by the head of the tourism industry of Country X, there was no rise in the number
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Step 1: Identify the question
The question is asking us to explain the discrepancy between no rise in the number of tourists or in the average sum of money spent by each tourist in the past year and the steep increase of almost 20 percent in profits from the tourist industry in that time span
Step 2: Deconstruct the argument
- NO inc in # of T / avg $$ spent per T
- Prof inc 20% from T ind.
Noted that Profit = revenue - cost
Step 3: State the goal
The number of tourists and the total money spent per tourist did not increase last year, but the profit from the tourist industry increased by 20%. We need to find an explanation for this discrepancy. I know that profit is equal to revenue minus cost. Since revenue is stagnant from the no increase in the number of tourists, the cost must have reduced in order to have an increase in profit.
Step 4: Work from wrong to right
A) The tourists last year came mostly from developed countries, whereas previously most tourists came from developing countries. => irrelevant, no impact to the argument
B) A rise of 20% was estimated for last year in the amount of tourists expected to frequent Country X.
=> no tie to the argument, providing additional info that makes no impact to the passage
C) Following a long strike, employers in the tourism industry were forced at the beginning of last year to raise salaries by 20%. => direct contradiction, if cost is raised and rev is stagnant, profit should be reduced
D) A change in the foreign ministry of Country X, which was authorized at the beginning of last year, has made it much easier for tourists to enter the country.
=> Confusing, if it was easier for tourists to enter the country, why didn't the number of tourists increase last year?
E) A general rise in unemployment throughout the country enabled employers in the tourism industry to significantly cut salaries at the beginning of last year.
AHA! this is the one, salaries decrease = operating cost is reduced, so profit increase
Answer: E
The question is asking us to explain the discrepancy between no rise in the number of tourists or in the average sum of money spent by each tourist in the past year and the steep increase of almost 20 percent in profits from the tourist industry in that time span
Step 2: Deconstruct the argument
- NO inc in # of T / avg $$ spent per T
- Prof inc 20% from T ind.
Noted that Profit = revenue - cost
Step 3: State the goal
The number of tourists and the total money spent per tourist did not increase last year, but the profit from the tourist industry increased by 20%. We need to find an explanation for this discrepancy. I know that profit is equal to revenue minus cost. Since revenue is stagnant from the no increase in the number of tourists, the cost must have reduced in order to have an increase in profit.
Step 4: Work from wrong to right
A) The tourists last year came mostly from developed countries, whereas previously most tourists came from developing countries. => irrelevant, no impact to the argument
B) A rise of 20% was estimated for last year in the amount of tourists expected to frequent Country X.
=> no tie to the argument, providing additional info that makes no impact to the passage
C) Following a long strike, employers in the tourism industry were forced at the beginning of last year to raise salaries by 20%. => direct contradiction, if cost is raised and rev is stagnant, profit should be reduced
D) A change in the foreign ministry of Country X, which was authorized at the beginning of last year, has made it much easier for tourists to enter the country.
=> Confusing, if it was easier for tourists to enter the country, why didn't the number of tourists increase last year?
E) A general rise in unemployment throughout the country enabled employers in the tourism industry to significantly cut salaries at the beginning of last year.
AHA! this is the one, salaries decrease = operating cost is reduced, so profit increase
Answer: E
