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Admissions Success Stories Over the past few years, retailers in the town of

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Over the past few years, retailers in the town of

Post Tue Aug 07, 2018 7:24 am

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Over the past few years, retailers in the town of Statesville have suffered from decreasing sales, largely because increasing numbers of consumers, after seeing items in stock at those retailers' stores, have opted instead to purchase those items on the Internet. As a result, Statesville's local government revenues have been impacted as well. To make up the lost revenue, Statesville's mayor has proposed legislation that would require Internet retailers to charge and remit local sales taxes on all orders shipped to addresses in Statesville, at the same tax rate assessed on purchases in physical stores. If this legislation is enacted, the mayor reasons, Statesville will be able to bring its revenue back up to the level of a few years ago.

All of the following, if true, cast doubt on the mayor's conclusion EXCEPT

(A) Because they do not need to rent or maintain physical showrooms, Internet retailers generally charge substantially lower prices for most items than do physical stores.

(B) The vast majority of Statesville's residents have at least one trusted friend or family member who lives in one of the smaller towns surrounding Statesville and whom they would trust to receive their packages.

(C) Statesville's retail stores have been consistently considered the best in the county, and consequently draw a lot of shoppers from other towns.

(D) Over the next few years, the Statesville area is likely to experience a severe recession, which could reduce consumer spending by as much as 40 percent.

(E) Administering the proposed tax will increase the cost of doing business for Internet retailers, who will then pass the increased cost on to consumers in the form of slight markups on the price of merchandise.

OA E

Source: Manhattan GMAT

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Post Wed Aug 08, 2018 8:31 am
Option A - INCORRECT.
Because they do not need to rent or maintain physical showrooms, Internet retailers generally charge substantially lower prices for most items than do physical stores. This option cast doubt on the mayors conclusion on how to generate revenue for the state.

Option B - INCORRECT.
The vast majority of Statesville's residents have at least one trusted friend or family member who lives in one of the smaller towns surrounding Statesville and whom they would trust to receive their packages. Therefore the buyer will escape the payment of Tax assigned to goods bought online.

Option C - INCORRECT.
If this claim that, ''Statesville's retail stores have been consistently considered the best in the county'' then they don't need to complain of low sales or see online stores as a competitor, because shoppers will always patronize the store due to its subsequent success of low price sales.

Option D - INCORRECT.
Over the next few years, the Statesville area is likely to experience a severe recession, which could reduce consumer spending by as much as 40 percent. However this claim does not cast a doubt on the conclusion of the mayor.

Option E - CORRECT.)
The claim in this option does not cast a doubt on the mayors conclusion. Administering the proposed tax will increase the cost of doing business for Internet retailers, who will then pass the increased cost on to consumers in the form of slight markups on the price of merchandise. However, the success of this plan will aid a vast increase in the revenue generation for the state back to the level of the past few years.

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