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Discount retailer!---resolve the paradox

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Discount retailer!---resolve the paradox

by amysky_0205 » Tue Dec 18, 2012 1:11 am
A discount retailer of basic household necessities employs thousands of people and pays most of them at the minimum wage rate. Yet following a federally mandated increase of the minimum wage rate that increased the retailer's operating costs considerably, the retailer's profits increased markedly.

Which of the following, if true, most helps to resolve the apparent paradox?
(A) Over half of the retailer's operating costs consist of payroll expenditures; yet only a small percentage of those expenditures go to pay management salaries.
(B) The retailer's customer base is made up primarily of people who earn, or who depend on the earnings of others who earn, the minimum wage.
(C) The retailer's operating costs, other than wages, increased substantially after the increase in the minimum wage rate went into effect.
(D) When the increase in the minimum wage rate went into effect, the retailer also raised the age rate for employees who had been earning just above minimum wage.
(E) The majority of the retailer's employees work as cashiers, and most cashiers are paid the minimum wage.

OA: B

can someone explain A, B and D?

thank u so much!
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by Sk1ver » Tue Dec 18, 2012 11:37 pm
No prob

First, let's summarize a bit the problem:

This is a paradox question, so we need to find a solution that will resolve the paradox (ie resolves both issues)

1. Operating costs increased (due to salary increase)
but at the same time
2. Profits increased

Now let's take a look at the answer choices:

(A) Over half of the retailer's operating costs consist of payroll expenditures; yet only a small percentage of those expenditures go to pay management salaries. - Knowing this, I cann't resolve the issue of increased profits...

(B) The retailer's customer base is made up primarily of people who earn, or who depend on the earnings of others who earn, the minimum wage. - Bingo! If customers earn more money (as their salaries have been increased) they will spend more! So we have a solution = Profit increased due to increased sales!

(C) The retailer's operating costs, other than wages, increased substantially after the increase in the minimum wage rate went into effect. - As in A, I cann't resolve the issue of increased profits...

(D) When the increase in the minimum wage rate went into effect, the retailer also raised the age rate for employees who had been earning just above minimum wage. - So what? I still don't know how this issue influenced the profits of the Company

(E) The majority of the retailer's employees work as cashiers, and most cashiers are paid the minimum wage. - Again.. no info about the influence on profits

Hope it was helpful !
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by amysky_0205 » Wed Dec 19, 2012 5:02 am
Hii thank u for ur reply!

Can u or someone explain more about option A?

cause i still can't get it why it's wrong.

thank u so much!
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by The Iceman » Wed Dec 19, 2012 1:50 pm
amysky_0205 wrote:Hii thank u for ur reply!

Can u or someone explain more about option A?

cause i still can't get it why it's wrong.

thank u so much!
For option A
As per the argument the operating expense of the retailer has increased primarily in the form of payroll expenditures because of increased wages that need to be paid.

If >50% of the retailer's operating costs consist of payroll expenditures, then it tends to bring down the retailer's profit.

Also, how the payroll expenditure is shared thereafter (management salaries, or any other X, Y, Z salaries)is immaterial in trying to show that retailer's profits increased markedly?
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