Fish currently costs

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BTGmoderatorDC: Moderator; Posts: 7187; Joined: Thu Sep 07, 2017 4:43 pmFollowed by: 23 members

by BTGmoderatorDC » Fri Nov 24, 2017 5:45 am

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

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Source: Beat The GMAT — Critical Reasoning | Fri Nov 24, 2017 5:45 am

DavidG@VeritasPrep: Legendary Member; Posts: 2663; Joined: Wed Jan 14, 2015 8:25 amFollowed by: 128 members; Location: Boston, MA; Thanked: 1153 times; GMAT Score:770

by DavidG@VeritasPrep » Fri Nov 24, 2017 12:06 pm

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.

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BTGmoderatorDC: Moderator; Posts: 7187; Joined: Thu Sep 07, 2017 4:43 pmFollowed by: 23 members

by BTGmoderatorDC » Wed Jan 17, 2018 9:37 pm

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!

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Weettertur: Newbie | Next Rank: 10 Posts; Posts: 4; Joined: Tue Jan 23, 2018 8:41 am

by Weettertur » Wed Jan 24, 2018 6:25 am

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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ErikaPrepScholar: Legendary Member; Posts: 503; Joined: Thu Jul 20, 2017 9:03 amFollowed by: 15 members; Thanked: 86 times; GMAT Score:770

by ErikaPrepScholar » Wed Jan 24, 2018 7:13 am

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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