A "vice tax" can suppress demand for a product or service that is not

I fell for D, although wasn't convinced with it. But after seeing OA and thinking through little bit more, I think OA makes sense. Here one thing is common between two regions - "vice tax" whereas the outcome is different. That is because only "vice tax" is not enough to curb the demand. Option C introduces another regulation that, in addition to vice tax, is responsible for success of the plan

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Basically the question is asking for an alternative explanation as to why even after increasing the tax on nicotine, the consumption has not reduced.
Option C - directly gives us an alternative reason that it is advertising that is pushing people to consume nicotine in spite of higher prices.

Thnx

Hello,

As per my analysis, Option D justifies and resolves the paradox.

It is clear from premise that the "vice tax" can suppress demand for a product or service that is not wholly in the public's favor by making it more expensive

If the public/people in Balbonia are favorable for nicotine products (ingrained habit i.e fixed habit) then the vice tax shall not produce the same effect similar to the effect in Geraldia where people donot smoke habitually.

Option D clearly explains the paradox.

Please advise. I cannot understand why OA is C ?

Thank you,
Srividhya

D could explain that the number of cigarettes smoked after dinner remains undiminished. However it cannot explain why the total cigarette consumption (throughout the day) remains undiminished.

Option C may explain this discrepancy. The driving force to reduce cigarette consumption due to higher prices may be compensated by the higher advertising.

Hi sayantanc2k,
What could be the basis for eliminating B?

B would be a contender of C, if in B instead of "different tax rate", "lower tax rate" were mentioned. However "different" may imply "higher" or "lower". Therefore B could be or could not be a statement that explains the discrepancy. On the other hand, option C undoubtedly explains the discrepancy. Hence option C is better than B.

OFFICIAL EXPLANATION:

Reading the question: We inhale the prompt. The vice tax has worked in G country, but not in B country, even though the tax did affect the price of nicotine products as planned. Why?, we are asked.

Creating a filter: the question rules out price as an explanation, so the explanation is something other than price. Maybe people in B country love their nicotine products more and are unperturbed by the new prices. Maybe people in B country are richer, although that does touch on pricing in some ways. We imagine that B country is more nicotine-demanding. We can think of our filter for the correct answer is "demand, not price."

Applying the filter: choice (A) doesn't touch on demand, and the tax effects should be unrelated to the variety of products, if they are taxed equally, which we're led to believe. So (A) is out. Choice (B) is out; the mechanism to achieve the effect is irrelevant if the price effect is equal, which we're led to believe. Choice (C) is close to our filter, since it touches on the subject of demand. Prices in B country are up, but increased advertising could help with demand. Choice (D) also concerns demand, so it passes the filter. Choice (E) is out; we don't see any reason to think other vice taxes would affect this vice tax. That leaves us with choices (C) and (D).

Logical proof: we'll find an objective difference between (C) and (D). The prompt has a dramatic phrase: demand for nicotine products remained undiminished. Abundant advertising, in (C), could explain why demand was undiminished across the board--in basically all nicotine-buying and -consuming situations. After-dinner smoking, in (D), could explain why some nicotine consumption would survive, but it doesn't explain demand going completely undiminished.

The correct answer is (C).
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