BREAKING: Target Test Prep releases Brand New 2026 On Demand GMAT prep course

Redeem

Discount in billboards - Not convinced with OA.

This topic has expert replies
Post new topic Post Reply
Previous Topic Next Topic
Master | Next Rank: 500 Posts
Posts: 184
Joined: Tue Sep 07, 2010 9:43 am
Thanked: 6 times
Followed by:1 members

Discount in billboards - Not convinced with OA.

by rahulvsd » Sun Apr 22, 2012 4:06 am
A certain city offers publicly owned, desirable billboard-advertising space at heavily discounted monthly rates to locally owned businesses. Since the implementation of this policy, the city has increased the amount of billboard space sold per month. Nevertheless, the city could increase its revenues by revoking these discounts.
Which of the following, if true, most strongly supports the claim above regarding the city's revenues?

A. The amount of discount generally offered is carefully calculated to represent the minimum needed to drive sales to local businesses.

B. The discount was announced through select news channels and websites, but did not receive sufficient coverage for many local businesses to hear about it.

C. Many local businesses sub-lease their billboard space to non-local businesses at a significant markup.

D. For established local businesses, the purpose of this promotion is to allow such local businesses to fortify their market position against new chain stores that generally have better access to high-visibility advertisement space.

E. Prior to the implementation of the discount, many city-owned billboards went empty for lack of interested buyers.

[spoiler]OA: C.[/spoiler] Lets take a look at Choice B. Even though local businesses did not hear about the promotional campaign, they still bought the city's advertising space. So even without the discounts, the advertising space will sell as much as it did during discounted rates and without discounting the rates, the city could actually increase its revenues. Is this not a strengthener?
Top
Source: — Critical Reasoning |
User avatar
Legendary Member
Posts: 1239
Joined: Tue Apr 26, 2011 6:25 am
Thanked: 233 times
Followed by:26 members
GMAT Score:680

by sam2304 » Sun Apr 22, 2012 4:38 am
rahulvsd wrote:Lets take a look at Choice B. Even though local businesses did not hear about the promotional campaign, they still bought the city's advertising space. So even without the discounts, the advertising space will sell as much as it did during discounted rates and without discounting the rates, the city could actually increase its revenues. Is this not a strengthener?
Yes it is a strengthener but C is a better and more direct answer choice that answers our question. There can be more than one strengthener and we have to choose which most strongly supports. Remember the question stem - "which of the following, if true, would most strengthen the argument".
Getting defeated is just a temporary notion, giving it up is what makes it permanent.
https://gmatandbeyond.blogspot.in/
Top
User avatar
Master | Next Rank: 500 Posts
Posts: 342
Joined: Wed Jul 08, 2009 8:50 am
Thanked: 214 times
Followed by:19 members
GMAT Score:740

by Birottam Dutta » Sun Apr 22, 2012 4:47 am
Also, we need to identify here which point correctly shows that revoking the discounts will not have any adverse affect on the sale ability of the ad spaces.

Although B says that the discounts did not receive too much promotion in local newspapers, it does not say that the increase in selling of ad spaces is not due to the discounts. Even if the promotional campaigns were satisfactory, the increase in selling of ad spaces could still have been due to discounts. So, B does not give information about whether the businesses would still buy ad spaces without the discounts.

However, C says so, therefore C is a better choice!
Top
Master | Next Rank: 500 Posts
Posts: 341
Joined: Sun Mar 25, 2012 6:59 pm
Thanked: 17 times
Followed by:4 members
GMAT Score:720

by ice_rush » Sun Apr 22, 2012 3:56 pm
(B) does not strengthen the argument. What difference does it make if the discounts were broadcasted on multiple news channels? People would still be buying at the discounted price - This does not help to increase the revenues. The issue here is not about selling the space at a discounted price (which is what choice (B) is talking about), but rather increasing revenues by removing the discount.

Hope this helps!
Top
User avatar
Legendary Member
Posts: 1665
Joined: Thu Nov 03, 2011 7:04 pm
Thanked: 165 times
Followed by:70 members

by karthikpandian19 » Thu Jul 12, 2012 9:19 pm
The author states that a city gives discounted monthly advertising rates to local businesses on publicly owned billboard space. Further, the author claims that though this discount has driven sales, the city could increase revenues by revoking the discount.

We're asked to support the author's claim about revenues. The author claims that although the discount increased sales, it would generate more revenue to revoke the discount. The correct answer will also indicate this.

Choice C says that local businesses re-sell their advertising space to non-local businesses "at a significant markup." In other words, local businesses are selling the valuable ad space to buyers who will pay more. If the city revoked their discount, they could boost revenues by selling the desirable ad space at a higher rate to non-local businesses. Choice C is correct.

Choice A: This choice explains how the discount is calculated. In fact, it suggests that the city is offering discounts only to the extent that they are necessary to maximize revenues. It does not suggest that revoking the discount would increase revenues.

Choice B: Out of scope. This choice suggests the discount was not promoted effectively. It does not, however, suggest that the city would have higher revenues if the discount were discontinued.

Choice D: Irrelevant. The rationale underlying the discount, to give local businesses "better access to high-visibility advertisement space" does NOT address whether ad revenues would increase if no discount had been offered.

Choice E: Opposite. If the billboards were previously empty, they would have generated no revenue. The discount has increased the amount of billboard space sold per month. Thus, if true, this choice weakens the author's argument that revoking the discount could increase revenues.
Regards,
Karthik
The source of the questions that i post from JUNE 2013 is from KNEWTON

---If you find my post useful, click "Thank" :) :)---
---Never stop until cracking GMAT---
Top
User avatar
Master | Next Rank: 500 Posts
Posts: 218
Joined: Wed Dec 11, 2013 4:02 am
Thanked: 3 times
Followed by:4 members

by [email protected] » Fri Mar 07, 2014 9:05 am
Option "B" is wrong because "The companies that are unaware about the discounts are buying the spaces because the price is low; when price increases their buying capacity will decrease."
Option "C" is right because "Those companies that are non-local will buy the space as they are now buying".

Regards,
mukherjee

If you like my explanation, hit a "THANX".
Top
Post new topic Post Reply
• Page 1 of 1