I love Cigarettes :)

[gmatblood]

In the year following an 8-cent increase in the federal tax on a pack of cigarettes, sales of cigarettes fell 10%. In contrast, in the year prior to the tax increase, sales had fallen 1%. The volume of cigarette sales is therefore strongly related to the after-tax price of a pack of cigarettes.

The argument above requires which of the following assumptions?

A. During the year following the tax increase, the pretax price of a pack of cigarettes did not increase by as much as it had during the year prior to the tax increase.

B. The one percent fall in cigarette sales in the year prior to tax increase was due to a smaller tax increase.

C. The pretax price of a pack of cigarettes gradually decreased throughout the year before and the year after the tax increase.

D. For the year following the tax increase, the pretax price of a pack if cigarettes were not eight or more cents lower than it had been the previous year.

E. As the after-tax price of a pack of cigarettes rises, the pretax price also rises.

[rijul007]

IMO : B

[ranjeet75]

Yes B is definitely the assumption on which the argument "The volume of cigarette sales is therefore strongly related to the after-tax price of a pack of cigarettes" depends.

In the year when tax increases by 8-cent, sales fall by 10%. In the year tax increases by 0.5 cents, sales fall by 1%.

[mankey]

IMO: B

What is the OA?

Thanks.

[cool7241744]

IMO B is the right option

Because this options is describing the relationship of the variables discussed in the above paragraph.

[sam2304]

IMO B.

[tuanquang269]

In the year following an 8-cent increase in the federal tax on a pack of cigarettes, sales of cigarettes fell 10%. In contrast, in the year prior to the tax increase, sales had fallen 1%. The volume of cigarette sales is therefore strongly related to the after-tax price of a pack of cigarettes.

The argument above requires which of the following assumptions?

D. For the year following the tax increase, the pretax price of a pack if cigarettes were not eight or more cents lower than it had been the previous year.

Nope. I choose D. Let's me give more specific example:
The pretax price of a pack in 2010 = 20 cent
In 2011, the price of a pack after tax = 28 cent Right? Nope, I do not have information about pretax price.

I will negate the choice D. If the pretax price of a pack is >= 8 cent. I mean that the pretax price of a pack is 12 cent or lower. The price will be 20 or lower comparable with price of 2010. Although price after tax is the same, the sales in 2011 is still less than in 2010. So, price do not relate to sale. Weaken. This is the assumption.

B. The one percent fall in cigarette sales in the year prior to tax increase was due to a smaller tax increase.

B will wrong if the pretax price in 2010 (previous year) higher than the price in 2011. Lack of mentioning pretax price makes this choice totally wrong. .

In a nutshell, with all questions relate to revenue, price, etc. We have to count all factor affect the final result .

[David@VeritasPrep]

tuanquang269 is exactly right!

On a question like this, where you have a proposed cause (tax increase leads to higher after-tax price) and an effect (fewer cigarettes sold) you have to be sure that the cause actually exists!

If choice D is not there, in other words if price of cigarettes actually went down EVEN after the 8 cent tax increase then the decrease in the volume of cigarettes sold is not a result of price.

[GMATGuruNY]

I received a PM asking me to comment. Check my post here:

https://www.beatthegmat.com/in-the-year- ... 83001.html