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# A certain city offers publicly owned, desirable

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A certain city offers publicly owned, desirable [#permalink]

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22 Mar 2011, 03:09
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A certain city offers publicly owned, desirable billboard-advertising space at heavily discounted monthly rates to locally owned businesses. Since the implementation of this policy, the city has increased the amount of billboard space sold per month. Nevertheless, the city could increase its revenues by revoking these discounts.
Which of the following, if true, most strongly supports the claim above regarding the city's revenues?

A. The amount of discount generally offered is carefully calculated to represent the minimum needed to drive sales to local businesses.

B. The discount was announced through select news channels and websites, but did not receive sufficient coverage for many local businesses to hear about it.

C. Many local businesses sub-lease their billboard space to non-local businesses at a significant markup.

D. For established local businesses, the purpose of this promotion is to allow such local businesses to fortify their market position against new chain stores that generally have better access to high-visibility advertisement space.

E. Prior to the implementation of the discount, many city-owned billboards went empty for lack of interested buyers.
[Reveal] Spoiler: OA

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22 Mar 2011, 03:23
gmatpapa wrote:
A certain city offers publicly owned, desirable billboard-advertising space at heavily discounted monthly rates to locally owned businesses. Since the implementation of this policy, the city has increased the amount of billboard space sold per month. Nevertheless, the city could increase its revenues by revoking these discounts.
Which of the following, if true, most strongly supports the claim above regarding the city's revenues?

A. The amount of discount generally offered is carefully calculated to represent the minimum needed to drive sales to local businesses. Does not say anything about increasing revenues by revoking discounts. Irrelevant

B. The discount was announced through select news channels and websites, but did not receive sufficient coverage for many local businesses to hear about it. Even though local businesses did not hear about the promotional campaign, they still bought the city's advertising space. So even without the discounts, the advertising space will sell as much as it did during discounted rates and without discounting the rates, the city could actually increase its revenues. IMO this option looks okay. But unfortunately, this is not the OA.

C. Many local businesses sub-lease their billboard space to non-local businesses at a significant markup. This is the OA and here's the OE

Choice C says that local businesses re-sell their advertising space to non-local businesses "at a significant markup." In other words, local businesses are selling the valuable ad space to buyers who will pay more. If the city revoked their discount, they could boost revenues by selling the desirable ad space at a higher rate to non-local businesses. Choice C is correct.

Here, can we assume that the city is willing to sell advertising space to outside businesses?. Are there no restrictions s such in having such assumption?

D. For established local businesses, the purpose of this promotion is to allow such local businesses to fortify their market position against new chain stores that generally have better access to high-visibility advertisement space. Strengthening local businesses is never mentioned in the argument. Out of Scope.

E. Prior to the implementation of the discount, many city-owned billboards went empty for lack of interested buyers.Opposite answer. This option actually goes on to say that promotional campaigns are in fact necessary. It would've been a very good answer choice if this was a weakening question. But not to be.

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23 Mar 2011, 21:28
yah (C) made the most sense out of all, not a very hard question compared to the knewton challenge questions
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24 Mar 2011, 08:48
A certain city offers publicly owned, desirable billboard-advertising space at heavily discounted monthly rates to locally owned businesses. Since the implementation of this policy, the city has increased the amount of billboard space sold per month. Nevertheless, the city could increase its revenues by revoking these discounts.
Which of the following, if true, most strongly supports the claim above regarding the city's revenues?

A. The amount of discount generally offered is carefully calculated to represent the minimum needed to drive sales to local businesses.
This provides evidence to the contrary. If the discount offered is calculated to be the exact amount to drive sales, eliminating the discount will lower sales.

B. The discount was announced through select news channels and websites, but did not receive sufficient coverage for many local businesses to hear about it.
If anything, this provides evidence to the contrary. This evidence weakens instead of strengthens.

C. Many local businesses sub-lease their billboard space to non-local businesses at a significant markup.
Correct, this suggests that if they remove the discount, non-local businesses will buy the billboard space at a higher price.

D. For established local businesses, the purpose of this promotion is to allow such local businesses to fortify their market position against new chain stores that generally have better access to high-visibility advertisement space.
This is out of scope. This has no bearing on how much revenue will be gained. Incorrect.

E. Prior to the implementation of the discount, many city-owned billboards went empty for lack of interested buyers.
This provides evidence to the contrary. Incorrect.
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24 Mar 2011, 10:58
I said B.. see reasoning in my above post.. But the OA is C, which IMO makes assumptions i'm not too convinced of.. CR specialists, please give your views!
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Last edited by gmatpapa on 25 Mar 2011, 06:38, edited 1 time in total.
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24 Mar 2011, 11:43
I am with C but can't deny gmatpapa's reasoning regarding assumption.
can we assume that the city is willing to sell advertising space to outside businesses?
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24 Mar 2011, 20:33
Well, if the city didn't also sell to non-local businesses, then the prices that they sell billboard space to local businesses for wouldnt be "discounted"

If the city only sells to local businesses, then the question would read:
A certain city offers publicly owned, desirable billboard-advertising space at low monthly rates to locally owned businesses.

The phrasing used in the actual question indicates that there is a price that they charge for advertising space, and a heavily-discounted price that they charge locally owned businesses
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25 Mar 2011, 06:45
jko wrote:
Well, if the city didn't also sell to non-local businesses, then the prices that they sell billboard space to local businesses for wouldnt be "discounted"

If the city only sells to local businesses, then the question would read:
A certain city offers publicly owned, desirable billboard-advertising space at low monthly rates to locally owned businesses.

The phrasing used in the actual question indicates that there is a price that they charge for advertising space, and a heavily-discounted price that they charge locally owned businesses

Hmmm.. the premise doesn't let us assume that the city only sells to local businesses. Nor does it let us assume that it does not sell to outside businesses. The answer would be clear if any of the two assumptions were made explicit. I remain confused.
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25 Mar 2011, 07:00
gmatpapa wrote:
jko wrote:
Well, if the city didn't also sell to non-local businesses, then the prices that they sell billboard space to local businesses for wouldnt be "discounted"

If the city only sells to local businesses, then the question would read:
A certain city offers publicly owned, desirable billboard-advertising space at low monthly rates to locally owned businesses.

The phrasing used in the actual question indicates that there is a price that they charge for advertising space, and a heavily-discounted price that they charge locally owned businesses

Hmmm.. the premise doesn't let us assume that the city only sells to local businesses. Nor does it let us assume that it does not sell to outside businesses. The answer would be clear if any of the two assumptions were made explicit. I remain confused.

"the premise doesn't let us assume that the city only sells to local businesses."
"the premise doesn't let us assume that it does not sell to outside businesses."
The statements above are saying the same thing, since if a city only sells to local businesses, then it does not sell to outside businesses (and vice versa).

Since the premise doesn't let us assume that the city only sells to local businesses, we can agree that the premise indicates otherwise.

Thus, "the premise indicates the city sells to both local and outside businesses"

I feel that the first sentence of the argument clearly implies that they sell to both local and outside businesses. Observing implications is not the same as making assumptions.
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26 Mar 2011, 14:25
gmatpapa wrote:
A certain city offers publicly owned, desirable billboard-advertising space at heavily discounted monthly rates to locally owned businesses. Since the implementation of this policy, the city has increased the amount of billboard space sold per month. Nevertheless, the city could increase its revenues by revoking these discounts.
Which of the following, if true, most strongly supports the claim above regarding the city's revenues?

B. The discount was announced through select news channels and websites, but did not receive sufficient coverage for many local businesses to hear about it. Even though local businesses did not hear about the promotional campaign, they still bought the city's advertising space. So even without the discounts, the advertising space will sell as much as it did during discounted rates and without discounting the rates, the city could actually increase its revenues. IMO this option looks okay. But unfortunately, this is not the OA.

conclusion: the city could increase its revenues by revoking these discounts.

i actually think (B) weakens the claim, if the discount went out to only select news channels and websites, it is possible that not all businesses area aware of the billboard discounts? therefore, revoking the discounts can hurt revenue?
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26 Mar 2011, 22:29
gtr022001 wrote:
gmatpapa wrote:
A certain city offers publicly owned, desirable billboard-advertising space at heavily discounted monthly rates to locally owned businesses. Since the implementation of this policy, the city has increased the amount of billboard space sold per month. Nevertheless, the city could increase its revenues by revoking these discounts.
Which of the following, if true, most strongly supports the claim above regarding the city's revenues?

B. The discount was announced through select news channels and websites, but did not receive sufficient coverage for many local businesses to hear about it. Even though local businesses did not hear about the promotional campaign, they still bought the city's advertising space. So even without the discounts, the advertising space will sell as much as it did during discounted rates and without discounting the rates, the city could actually increase its revenues. IMO this option looks okay. But unfortunately, this is not the OA.

conclusion: the city could increase its revenues by revoking these discounts.

i actually think (B) weakens the claim, if the discount went out to only select news channels and websites, it is possible that not all businesses area aware of the billboard discounts? therefore, revoking the discounts can hurt revenue?

The premise says that the city has increased its number of billboard sales since the implementation of the policy. Option B says that many businesses were unaware of the policy, but still went ahead and bought the advertising spaces. So discount or no discount, the city was able to increase its sales. And since the city offered discounts, the revenues would be lesser than when there were no discounts. So, if it stops offering discounts, there still will be sales and the city will be able to fetch more revenues.
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26 Apr 2011, 08:20
C clearly, revenues could be increased without discounts , if the billboards which are sub-leased by the local businesses at higher rates, could be directly leased by the city authorities.
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26 Apr 2011, 18:58
A is a nice shell game answer.
C is straight.
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Re: A certain city offers publicly owned, desirable [#permalink]

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15 Sep 2012, 02:36
I still wonder about Choice C.
C: "Many local businesses sub-lease their billboard space to non-local businesses at a significant markup."
If normal price is 5000, the deduced price for local business is 4000, the markup is 500, then the price for non-local business is 4500.
If the we revoke the discount, non-local business would have less incentive to buy the ad, then there is no way revenue for the city will increase.
I think Choice C depends on the level of the "significant markup"
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Re: A certain city offers publicly owned, desirable [#permalink]

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15 Sep 2012, 09:42
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.
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Re: A certain city offers publicly owned, desirable [#permalink]

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15 Sep 2012, 13:33
+1 C

There are companies interested in paying for those spaces without a discount.
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Re: A certain city offers publicly owned, desirable [#permalink]

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27 Oct 2012, 03:07
I think the Assumption here is

Discount given has excess of margin to earn a lot of profit.
The billboard has been rented to local business on heavily discounted prices...
Conclusion: the city can earn more if the discount is narrowed.....

C fits in the gap
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Re: A certain city offers publicly owned, desirable [#permalink]

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11 Apr 2014, 15:33
Can anyone please explain me the reason for C? the existing explanations don't seem to make sense to me.
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Re: A certain city offers publicly owned, desirable [#permalink]

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19 Mar 2015, 02:09
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?

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A certain city offers publicly owned, desirable [#permalink]

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19 Apr 2015, 03:18
gauravkaushik8591 wrote:
Can anyone please explain me the reason for C? the existing explanations don't seem to make sense to me.

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.
A certain city offers publicly owned, desirable   [#permalink] 19 Apr 2015, 03:18

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