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Fish currently costs about the same at seafood stores

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Fish currently costs about the same at seafood stores [#permalink] New post 27 May 2008, 18:09
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62% (02:09) correct 38% (01:23) wrong based on 747 sessions
Fish currently costs about the same at seafood stores throughout Eastville and its surrounding suburbs. Seafood stores buy fish from the same wholesalers and at the same prices, and other business expenses have also been about the same. But new tax breaks will substantially lower the cost of doing business within the city. Therefore, in the future, profit margins will be higher at seafood stores within the city than at suburban seafood stores.

For the purposes of evaluating the argument, it would be most useful to know whether

(A) More fish wholesalers are located within the city than in the surrounding suburbs
(B) Any people who currently own seafood stores in the suburbs surrounding Eastville will relocate their businesses nearer to the city
(C) The wholesale price of fish is likely to fall in the future
(D) Fish has always cost about the same at seafood stores throughout Eastville and its surrounding suburbs
(E) Seafood stores within the city will in the future set prices that are lower than those at suburban seafood stores
[Reveal] Spoiler: OA
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Re: CR-Fish stores [#permalink] New post 27 May 2008, 18:25
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Re: CR-Fish stores [#permalink] New post 27 May 2008, 18:51
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E for me. Profit margins would be dictated by price set minus the wholesale price. So the missing link would have to do with the price set.
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Re: CR-Fish stores [#permalink] New post 27 May 2008, 22:07
Another E, for reasons mentioned above. Good question +1.
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Re: CR-Fish stores [#permalink] New post 27 May 2008, 22:10
IMO E too.
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Re: CR-Fish stores [#permalink] New post 27 May 2008, 22:21
E,
if they will lower the price, they might end up with same profit margin as before.
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Re: CR-Fish stores [#permalink] New post 27 May 2008, 22:23
D for me

If the retail prices were the same in the city and the suburb, then the new tax break would help city stores. And D tells you definitively that the prices has always been the same for city and suburb.

In E, what if the price in the city is already lower than in the suburb?

Or that the price in the city is already higher than the suburb? In this case, the profit margin is already higher, not just will be higher.
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Re: CR-Fish stores [#permalink] New post 28 May 2008, 19:15
gmatnub wrote:
D for me

If the retail prices were the same in the city and the suburb, then the new tax break would help city stores. And D tells you definitively that the prices has always been the same for city and suburb.

In E, what if the price in the city is already lower than in the suburb?

Or that the price in the city is already higher than the suburb? In this case, the profit margin is already higher, not just will be higher.


Conclusion:
Therefore, in the future, profit margins will be higher at seafood stores within the city than at
suburban seafood stores.

>>>We can come to teh conclusion when we know about the prices set at the stores within the city and the surban stores.
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Re: CR-Fish stores [#permalink] New post 28 May 2008, 19:16
OA is E
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Re: CR-Fish stores [#permalink] New post 28 May 2008, 20:04
I disagree with the supposed E OA

Here is an example:

let say the current cost of a fish is $5 including tax

suburbs sell for $10, current profit $5

cities sell for $8, current profit is $3

After $1 tax break

it costs suburbs $5 a fish, but only cost cities $4 a fish

suburbs sell for $10, suburbs profit will continue to be $5

cities sell for $8, but cities profit will increase to $4 (still lower profit than suburbs)

BUT if cities sells for $9.50, cities profit will increase to $5.50 (higher profit than suburbs, BUT still lower selling price)

So the lower selling price of the city stores can still generate higher profit than suburb stores. The relative prices of city to suburb stores don't necessary correlate to the actual profit comparison.
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Re: CR-Fish stores [#permalink] New post 28 May 2008, 21:03
Mate read the question premise:

"Fish currently costs about the same at seafood stores throughout Eastville and its
surrounding suburbs. Seafood stores buy fish from the same wholesalers and at the
same prices, and other business expenses have also been about the same"


This means currently the profits are identical.

gmatnub wrote:
I disagree with the supposed E OA

Here is an example:

let say the current cost of a fish is $5 including tax

suburbs sell for $10, current profit $5

cities sell for $8, current profit is $3

After $1 tax break

it costs suburbs $5 a fish, but only cost cities $4 a fish

suburbs sell for $10, suburbs profit will continue to be $5

cities sell for $8, but cities profit will increase to $4 (still lower profit than suburbs)

BUT if cities sells for $9.50, cities profit will increase to $5.50 (higher profit than suburbs, BUT still lower selling price)

So the lower selling price of the city stores can still generate higher profit than suburb stores. The relative prices of city to suburb stores don't necessary correlate to the actual profit comparison.
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Re: CR-Fish stores [#permalink] New post 28 May 2008, 21:22
bsd_lover wrote:
Mate read the question premise:

"Fish currently costs about the same at seafood stores throughout Eastville and its
surrounding suburbs. Seafood stores buy fish from the same wholesalers and at the
same prices, and other business expenses have also been about the same"





Thanks, I somehow missed the first sentence. You are right.
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Re: CR-Fish stores [#permalink] New post 28 May 2008, 21:24
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Dont worry I do it all the time :)
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Re: CR-Fish stores [#permalink] New post 28 May 2008, 21:27
bsd_lover wrote:
Dont worry I do it all the time :)


Yes that is true, but you are the only person who explained my overlook.
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Re: CR-Fish stores [#permalink] New post 29 May 2008, 02:58
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goalsnr wrote:
Fish currently costs about the same at seafood stores throughout Eastville and its
surrounding suburbs. Seafood stores buy fish from the same wholesalers and at the
same prices, and other business expenses have also been about the same. But new tax
breaks will substantially lower the cost of doing business within the city. Therefore, in
the future, profit margins will be higher at seafood stores within the city than at
suburban seafood stores.
For the purposes of evaluating the argument, it would be most useful to know
whether.
(A)more fish wholesalers are located within the city than in the surrounding suburbs.
>> out of scope
(B) Any people who currently own seafood stores in the suburbs surrounding Eastville
will relocate their businesses nearer to the city
>> irrelevant
(C) The wholesale price of fish is likely to fall in the future
>> this would effect suburbian stores also.
(D)Fish has always cost about the same at seafood stores throughout Eastville and its
surrounding suburbs.
>> we are already given this information.
(E) Seafood stores within the city will in the future set prices that are lower than those
at suburban seafood stores

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Re: CR-Fish stores [#permalink] New post 07 Jun 2010, 09:20
E for me too....
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Re: CR-Fish stores [#permalink] New post 08 Jun 2010, 04:51
E for me too :)
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Re: CR-Fish stores [#permalink] New post 08 Jun 2010, 05:00
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nice!
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Re: CR-Fish stores [#permalink] New post 08 Jun 2010, 06:57
My answer would be D. Profit margin is nothing but ( Profit / revenue ) * 100.
If the fish selling stores maintain the same price, then certainly profit margin increases.
I am not convinced with the answer choice 'E'.
Could anyone explain me why the answer is not 'D'.
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Re: CR-Fish stores [#permalink] New post 10 Jun 2010, 00:26
You need the selling price for calculating the margin. D only talks about cost. Also, D is redundant as it is a rephrase of an info already given in the stem of the question.

E is the only one that talks about the selling price.

mohansrinivas wrote:
My answer would be D. Profit margin is nothing but ( Profit / revenue ) * 100.
If the fish selling stores maintain the same price, then certainly profit margin increases.
I am not convinced with the answer choice 'E'.
Could anyone explain me why the answer is not 'D'.

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Re: CR-Fish stores   [#permalink] 10 Jun 2010, 00:26
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