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100 points for $49 worth of Veritas practice GMATs FREE VERITAS PRACTICE GMAT EXAMS Earn 10 Points Per Post Earn 10 Points Per Thanks Earn 10 Points Per Upvote ## Fish currently costs ##### This topic has 2 expert replies and 2 member replies ### Top Member ## Fish currently costs Fish currently costs about the same at seafood stores throughout Eastville and its surrounding suburbs. Seafood stores buy fish from the same wholesalers and at the same prices, and other business expenses have also been about the same. But new tax breaks will substantially lower the cost of doing business within the city. Therefore, in the future, profit margins will be higher at seafood stores within the city than at suburban seafood stores. For the purposes of evaluating the argument, it would be most useful to know whether. (A)more fish wholesalers are located within the city than in the surrounding suburbs. (B) Any people who currently own seafood stores in the suburbs surrounding Eastville will relocate their businesses nearer to the city (C) The wholesale price of fish is likely to fall in the future (D)Fish has always cost about the same at seafood stores throughout Eastville and its surrounding suburbs. (E) Seafood stores within the city will in the future set prices that are lower than those at suburban seafood stores. Can some experts explain the Best Option? OA E ### GMAT/MBA Expert Legendary Member Joined 14 Jan 2015 Posted: 2667 messages Followed by: 122 members Upvotes: 1153 GMAT Score: 770 Top Reply lheiannie07 wrote: Fish currently costs about the same at seafood stores throughout Eastville and its surrounding suburbs. Seafood stores buy fish from the same wholesalers and at the same prices, and other business expenses have also been about the same. But new tax breaks will substantially lower the cost of doing business within the city. Therefore, in the future, profit margins will be higher at seafood stores within the city than at suburban seafood stores. For the purposes of evaluating the argument, it would be most useful to know whether. (A)more fish wholesalers are located within the city than in the surrounding suburbs. (B) Any people who currently own seafood stores in the suburbs surrounding Eastville will relocate their businesses nearer to the city (C) The wholesale price of fish is likely to fall in the future (D)Fish has always cost about the same at seafood stores throughout Eastville and its surrounding suburbs. (E) Seafood stores within the city will in the future set prices that are lower than those at suburban seafood stores. Can some experts explain the Best Option? OA E We know that city seafood stores and suburban seafood stores buy their food from the same wholesalers and have similar expenses. We know that the fish costs the same in both locations. So, to start, the stores should have similar profit margins. We're told that the city seafood stores are going to get a tax break, which, in effect will lower their costs.. So if the costs of city stores are less than the cost of suburban stores, it stands to reason that their profit margins will now be larger. However, if there was a reason to believe that their prices were going to decrease, we could no longer make this assumption, as the lower costs conferred by a lower tax rate would be offset by a lower unit revenue from a decrease in price. This is what E gives us. The lower taxes might reduce the cost, but a lower price would reduce their unit revenue, leaving us, at best, uncertain about profit margins. _________________ Veritas Prep | GMAT Instructor Veritas Prep Reviews Save$100 off any live Veritas Prep GMAT Course

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### GMAT/MBA Expert

Legendary Member
Joined
20 Jul 2017
Posted:
503 messages
Followed by:
11 members
86
GMAT Score:
770
Hi Weettertur,

We are asked to evaluate the argument from the passage: "Therefore, in the future, profit margins will be higher at seafood stores within the city than at suburban seafood stores." This means that we are comparing profit margins in the future to profit margins now.

Cost of seafood definitely plays into profit margins, so this is a tempting answer. However, the passage already tells us about the cost of seafood now: "Fish currently costs about the same at seafood stores throughout Eastville and its surrounding suburbs." In contrast, this answer choice tells us that seafood has "always" cost the same - in other words, the only information it gives us is about the cost of seafood in the past.

Since we want to compare profit margins in the future to profit margins now, knowing what the cost of seafood was like in the past doesn't actually matter - it isn't a part of our comparison! So we can eliminate D for being irrelevant.

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### Top Member

Moderator
Joined
07 Sep 2017
Posted:
3015 messages
Followed by:
6 members
DavidG@VeritasPrep wrote:
lheiannie07 wrote:
Fish currently costs about the same at seafood stores throughout Eastville and its
surrounding suburbs. Seafood stores buy fish from the same wholesalers and at the
same prices, and other business expenses have also been about the same. But new tax
breaks will substantially lower the cost of doing business within the city. Therefore, in
the future, profit margins will be higher at seafood stores within the city than at
suburban seafood stores.
For the purposes of evaluating the argument, it would be most useful to know
whether.
(A)more fish wholesalers are located within the city than in the surrounding suburbs.
(B) Any people who currently own seafood stores in the suburbs surrounding Eastville
will relocate their businesses nearer to the city
(C) The wholesale price of fish is likely to fall in the future
(D)Fish has always cost about the same at seafood stores throughout Eastville and its
surrounding suburbs.
(E) Seafood stores within the city will in the future set prices that are lower than those
at suburban seafood stores.

Can some experts explain the Best Option?

OA E
We know that city seafood stores and suburban seafood stores buy their food from the same wholesalers and have similar expenses. We know that the fish costs the same in both locations. So, to start, the stores should have similar profit margins. We're told that the city seafood stores are going to get a tax break, which, in effect will lower their costs.. So if the costs of city stores are less than the cost of suburban stores, it stands to reason that their profit margins will now be larger. However, if there was a reason to believe that their prices were going to decrease, we could no longer make this assumption, as the lower costs conferred by a lower tax rate would be offset by a lower unit revenue from a decrease in price. This is what E gives us. The lower taxes might reduce the cost, but a lower price would reduce their unit revenue, leaving us, at best, uncertain about profit margins.
Thanks a lot!

Newbie | Next Rank: 10 Posts
Joined
23 Jan 2018
Posted:
4 messages
Hi there! To my mind, the correct answer is D, but I am not sure about it. Can anyone explain it to me, please?

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