A certain city offers publicly owned, desirable billboard-advertising

I picked "C" but my line of reasoning was different than the few others explained above.

First of all, there is no reason to believe or assume that the city offers the advertising space directly to the non-local businesses. lets have a look at Option c . Many local businesses sub-lease their billboard space to non-local businesses at a significant markup. 1) Subleasing is renting out on lease and is different than directly selling the advertising space. Now the initial policy of offering the ad space to the local businesses at discounted rates seems like a strategy to attract the local businesses to advertise at a lower cost but once they (local business) see another lucrative opportunity to sublease the ad space to a nonlocal business thereby earning even more profits - they make it a practice and start subleasing. Now, the local businesses realise that the profits that they can make out of subleasing is sufficiently high. Even if they have to buy the ad space at a comparatively higher price (i.e. discounts revoked by the city) , they can consider doing the same.

Can anyone please explain me the reason for C? the existing explanations don't seem to make sense to me.

If local businesses lease their billboard space to non-local businesses, then there is an interest in billboard space. local businesses are acting as middlemen. Why selling discounted billboard space to local businesses when you might sell it to non-local businesses and turn a greater profit?

answer C

For the revenues to go up, It is essential that either the sales don't go down when the discounts are removed or the sales go extraordinarily high. Now If you see Option B, then it says that the promotions were not done properly but still there are increase in the sales. This could best be taken as .. since there were at least few people who knew about the discounts and hence the sales increased; however it may not mean that there were some people who dont know about the discounts but still buy the spaces.
If you consider Option C, that definitely mean that there are people who don't care about the discount and are willing to pay the non-discounted price which could increase the revenues.

But why is B incorrect ? Need help to understand that.

The question asks why there was an INCREASE in revenue after revoking - as per option B if many of the local business did not know about the spaces, there could not be any reason that after revoking the revenue would INCREASE. Option B could at most justify why there could be no decrease in the revenue, but it cannot justify WHY there is actually an increase. Hence B is not the correct answer.

Thanks for the reply.

Could you pls elaborate on "Option B could at most justify why there could be no decrease in the revenue".

By this, do you mean that the number of billboards sold per month will not decrease ? If this is the case then the revenue will increase since the discount is removed (so revenue/billloard is higher) and the sale number is same.

No, I meant the revenue, not the number of billboards. According to option B, there were only a few local businesses who used the billboard - so when the discount was removed, the no. of users decreased. In the extreme case, the coverage did not increase the usage at all, so when the discount was withdrawn, there was no change in revenue.

The best justification is that the usage did not reduce significantly even after revoking the discount. Option C is the best justification for the same. Before the discount was revoked, the local businesses were earning a "significant" amount of profit - after the discount is revoked the profit is shared with the city, but still they make profits and hence there is no significant reduction in usage.

Can anyone please explain why "E" is incorrect & how it weakens the argument ??

Very confusing answer. If the discount is removed it is possible that the local business owners will no longer find it profitable to sublease the billboards in the future thereby lowering the revenue

The author in the passage makes the claim that the city could increase its revenues by revoking the discount on the billboard space.
E does not strengthen the position.
If the billboards were empty for the lack of demand, and only after offering a discount did said demand increase, why would revoking it increase the revenues of the city? If before the discount there was a lack of buyers, and then you have a discount which add buyers, and then remove the discount, it would only take you back to the starting point - big empty billboards, without buyers - hence lower revenues (directly contradicting the authors point of an increase of revenues).

Compare E with the correct answer, C.
C states that businesses sub-lease the billboards to non-local businesses at a significant markup. This implies, with the further assumption that the "significant markup" is comparable with the discount offered, there are at least some small firms who are willing to pay a price similar to the non-discount price, the exact opposite of E. If this is true, then yes - the government can revoke the discount, and still find buyers for the billboards, which would likely increase their revenues.

Note that because this is an unofficial question, the answer choice C is not very well written - there are many assumptions in C that are required (the largest one is that the price offered by the sub-lease is at least comparable with the non-discount price), but it is the only answer choice that fits.

A can be eliminated because it is not relevant to the point at hand. A only gives information on how the discount is calculated, but does not tell us anything about the impact of the discount on sales.
B is also irrelevant. Even if the discount was not advertising properly, we are worried about the effects of removing the discount - B has no bearing on the focus of the argument.
D is a contender choice, but it requires quite a few further assumptions: the first assumption is that the large chain stores are willing to purchase the billboard space at the non-discount price, and the second is that the revenues lost by the erosion of business of the small firms to the large chain store is allocated to the cities revenues (they do not pay taxes to another city).
E is wrong for reasons explained above.
So from the 5 choices, A and B are irrelevant, D is a contender but is too far removed from the argument, and E is the direct opposite of what we are looking for.

Hope this helps!

Can anyone please explain why choice B is wrong ?

Premise : Sales are increasing when there is a discount.
Hypothesis : Removing the discount can increase revenue.

Option C : People didnt really know about the discount.

So if people are buying even tho they did not know that there is a discount. They will likely keep buying even if the discount is gone , hence increasing the revenue.