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A discount retailer of basic household necessities employs [#permalink]
 08 Jun 2011, 21:03
Question Stats:
99% (02:30) correct
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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.
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Re: Resolve paradox [#permalink]
08 Jun 2011, 21:45
ruturaj wrote: 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.
choice D is what i thought of..please let me knw why its wrong
Paradox = When Wages (costs for the retailer)increased, His profits also increased (where they should have decreased)
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. out of scope
(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. Resolves the paradox by saying that as his costs increased, his revenues increased as well giving higher profits
(C) The retailer’s operating costs, other than wages, increased substantially after the increase in the minimum wage rate went into effect.makes the paradox even more complex rather than resolving
(D) When the increase in the minimum wage rate went into effect, the retailer also raised the wage rate for employees who had been earning just above minimum wage.This one is more of an assumption underlying and makes the paradox all the more complex. It does not tell us how his profits increased.
(E) The majority of the retailer’s employees work as cashiers, and most cashiers are paid the minimum wage.Doesnt resolve the paradox Hope that makes it clear
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Re: Resolve paradox [#permalink]
09 Jun 2011, 02:21
ruturaj wrote: 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.
choice D is what i thought of..please let me knw why its wrong
Which of the following, if true, most helps to resolve the apparent paradox?
Paradox: How the retailer made high profits despite high operating cost caused by the increase in minimum wage?
(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.
This gives us a reason why the operating costs were increased, but it gives us no clue how the profits were increased.
(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.
It gives us an association between customers and wage but a little cumbersome to understand. Let's keep this aside as a prospective answer choice and come back to it later.
Come back here after reading rest of the choices:
This is giving us a reason behind his profits. This is telling us that the increase in minimum wage of the people may result in increased volume of the customers, who earn minimum wage, and purchase from those customers.
CORRECT
(C) The retailer’s operating costs, other than wages, increased substantially after the increase in the minimum
wage rate went into effect.
Again, this gives us the reason for the soared production costs but no clue about the 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.
Here the retailer spent more money because of the minimum wage increase. To make matter worse for himself, the retailer further increased the wage of some of his employees. This surely makes the operating costs high, very high. But, why are you not telling me what's the factor that contributed to his profits. Not good.
(E) The majority of the retailer’s employees work as cashiers, and most cashiers are paid the minimum wage.
This is a fact that's not giving me a reason for the profit. Just by raising cashiers pay won't give him the required profit.
Go back to B.
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Re: Resolve paradox [#permalink]
13 Jun 2011, 03:07
option D leaves an open end here.What happens to those people who are no longer in the age bracket.Are they removed,are they being payed more.Essentially how do they contribute to the profits is the question to be answered here. Thus D is POE'ed. between A and B - A does not give a clue about the increase in revenue. B gives it clean.
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Re: Resolve paradox [#permalink]
13 Jun 2011, 05:26
Choice B is the ans.
It establishes a relation between the wage earned and the expenditure individuals make.
If we see rest of the choices they say no reason to pacify the paradox.
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Re: Resolve paradox [#permalink]
14 Jun 2011, 17:44
Between B and D.....B is good
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Re: Resolve paradox
[#permalink]
14 Jun 2011, 17:44
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