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Because postage rates are rising, Home Decorator magazine

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Re: Because postage rates are rising, Home Decorator magazine [#permalink]

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New post 29 Mar 2013, 05:39
A small doubt regarding the same:

What is the logic behind cutting down the number of edition in a year?

1) If there were 12 editions and subscribers paid 2 $ per ediiton , the revenue is 24 $.
2) Now when the number is cut to 6, the revenue becomes only 12 $. I mean why will a subscriber pay the same rate when the number of issues he is getting is halved?

So even if the subscribers remain constant, aren't the revenues falling?
The answer revolves around reduction in ADs income, which agree with definitely. But what about the above discrepancy?

Please explain.

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Re: Because postage rates are rising Home Decorator magazine [#permalink]

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New post 29 Mar 2013, 05:45
A small doubt regarding the same:

What is the logic behind cutting down the number of edition in a year?

1) If there were 12 editions and subscribers paid 2 $ per ediiton , the revenue is 24 $.
2) Now when the number is cut to 6, the revenue becomes only 12 $. I mean why will a subscriber pay the same rate when the number of issues he is getting is halved?

So even if the subscribers remain constant, aren't the revenues falling?
The answer revolves around reduction in ADs income, which agree with definitely. But what about the above discrepancy?

Please explain.

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Re: Because postage rates are rising Home Decorator magazine [#permalink]

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New post 29 Mar 2013, 07:16
Hi Unstoppable,

The answer to your question lies in this sentence from the passage:

The quality of articles,the number of articles published per year, and the subscription price will not change

So whilst the number of issues goes down the number of articles stays the same.

So (to use an example at random) instead of 12 issues with 5 articles (total 60), you get 6 issues with 10 articles (total 60)

Same amount of stuff, just sent out in less packages.

Hope that makes sense

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Re: Because postage rates are rising, Home Decorator magazine [#permalink]

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New post 05 May 2013, 10:53
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unstoppable wrote:
A small doubt regarding the same:

What is the logic behind cutting down the number of edition in a year?

1) If there were 12 editions and subscribers paid 2 $ per ediiton , the revenue is 24 $.
2) Now when the number is cut to 6, the revenue becomes only 12 $. I mean why will a subscriber pay the same rate when the number of issues he is getting is halved?

So even if the subscribers remain constant, aren't the revenues falling?
The answer revolves around reduction in ADs income, which agree with definitely. But what about the above discrepancy?

Please explain.



Also in the Option A ..If say he is publishing 100 issues earlier and now has reduced to 50.
Say, postal rates were 1 per issues earlier and now they are 4/3.
So, total cost of sending 50 is around 66.67 and sending 100 with earlier rates is 100.

Now say per subscription(per issue) he earns $1 so total earlier was $100 on $100 while now its $50 on $66.67 investment.

So, even here the Profit is declining.

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New post 07 May 2013, 01:21
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prashant3161 wrote:
unstoppable wrote:
A small doubt regarding the same:

What is the logic behind cutting down the number of edition in a year?

1) If there were 12 editions and subscribers paid 2 $ per ediiton , the revenue is 24 $.
2) Now when the number is cut to 6, the revenue becomes only 12 $. I mean why will a subscriber pay the same rate when the number of issues he is getting is halved?

So even if the subscribers remain constant, aren't the revenues falling?
The answer revolves around reduction in ADs income, which agree with definitely. But what about the above discrepancy?

Please explain.



Also in the Option A ..If say he is publishing 100 issues earlier and now has reduced to 50.
Say, postal rates were 1 per issues earlier and now they are 4/3.
So, total cost of sending 50 is around 66.67 and sending 100 with earlier rates is 100.

Now say per subscription(per issue) he earns $1 so total earlier was $100 on $100 while now its $50 on $66.67 investment.

So, even here the Profit is declining.




actually, (a) actually STRENGTHENS the conclusion

here's HOW:
they're only going to send out half as many issues. therefore, unless the cost of postage doubles, they're actually going to spend less money on postage than they did before.

choice (a) says that postage will cost only 1/3 more - far less than double. therefore, choice (a) actually implies that the total cost of postage will go down. this is exactly the opposite of what you want.
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New post 30 Sep 2014, 02:20
I also go with D.
The advertising budget of a business is typically a subset of the larger sales budget and, within that, the marketing budget. Advertising is a part of the sales and marketing effort. Money spent on advertising can also be seen as an investment in building up the business.

In order to keep the advertising budget in line with promotional and marketing goals, a business owner should start by answering several important questions:

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Re: Because postage rates are rising, Home Decorator magazine [#permalink]

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New post 07 May 2015, 22:01
u2lover wrote:
Official Guide for GMAT Verbal Review, 2nd Edition

Practice Question
Question No.: 71
Page: 145
Difficulty:


Because postage rates are rising, Home Decorator magazine plans to maximize its profits by reducing by one half the number of issues it publishes each year. The quality of articles, the number of articles published per year, and the subscription price will not change. Market research shows that neither subscribers nor advertisers will be lost if the magazine's plan is instituted.

Which of the following, if true, provides the strongest evidence that the magazine's profits are likely to decline if the plan is instituted?

(A) With the new postage rates, a typical issue under the proposed plan would cost about one-third more to mail than a typical current issue would.
(B) The majority of the magazine's subscribers are less concerned about a possible reduction in the quantity of the magazine's articles than about a possible loss of the current high quality of its articles.
(C) Many of the magazine's long-time subscribers would continue their subscriptions even if the subscription price were increased.
(D) Most of the advertisers that purchase advertising space in the magazine will continue to spend the same amount on advertising per issue as they have in the past.
(E) Production costs for the magazine are expected to remain stable


Ans D. It nails it by mentioning that the profits from advertisement will go down, since the number of issues is reduced.

Nice question.

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Re: Because postage rates are rising, Home Decorator magazine [#permalink]

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New post 28 Jul 2015, 11:23
plumber250 wrote:
Hi Unstoppable,

The answer to your question lies in this sentence from the passage:

The quality of articles,the number of articles published per year, and the subscription price will not change

So whilst the number of issues goes down the number of articles stays the same.

So (to use an example at random) instead of 12 issues with 5 articles (total 60), you get 6 issues with 10 articles (total 60)

Same amount of stuff, just sent out in less packages.

Hope that makes sense

James


Hello James ,
suppose subscriptions revenue is S
advertising revenue is A
Costs (mailing + production) = C
profits = (s+a) -c = P1
Now with option D = (s+a/2) - c/2 = P2
now how can i tell that P1 > P2 ?
since it is given that Most advertisers spend same amount , may be it can't be exactly a/2
Am i right ?

Thanks :)

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Because postage rates are rising, Home Decorator magazine [#permalink]

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New post 06 Oct 2015, 19:25
Based on the information present in the argument above:-

Profit per issue = Advertisement cost per issue + subscription price per issue - Postage price per issue

- Subscription price is remaining constant
- postage price is increasing

For profits to decline look for the answer that attacks the advertisement cost either decreasing it or even keeping it constant.
Hence D.

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New post 29 Apr 2017, 08:26
Here is the important stuff:

1. The magazine is cutting the number of issues in half because of postage rates
2. The price will not change, the magazine will be larger, and quality remains the same.
3. No subscribers or advertisers will be lost

We want to know why their profits will decline despite these factors.

A. Incorrect. If the postage rises by 1/3 but they are cutting the number of issues in half they are going to lower their total postage costs over what they were the year before. Lower costs should mean higher, not lower profit.

B. Incorrect. The readers dont want to lose quality. The magazine is going to keep the same quality. That should mean that the readers will stay on board and continue to pay the cost, thus there will be no loss of profit.

C. Incorrect. This just tells us that if they increased the price people would still buy it. It has nothing to do with the current plan to keep the price the same nor indicates any reason profit will fall.

D. Correct. Lets use an example to illustrate: If advertisers used to spend $10 per issue in ads and there were 12 issues per year, each advertiser provided revenue of $120 to the magazine. Now the magazine is only going to produce 6 issues. If the ad revenue remains the same at $10 per issue the ad revenue generated is only going to be $60. That is a loss and gives evidence that profits will decline.

E. Incorrect. Nothing here would make us think profits would fall.
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New post 21 May 2017, 08:38
I want to ask about answer E
E. Production costs for the magazine are expected to remain stable.
The question says that: magazine's profits are likely to decline if the plan is instituted
Profits = revenue - cost
To reduce profits, we need to reduce revenue or/and increase or keep costs the same.
So E potentially reduces the profits
Why is E not an answer?

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Re: Because postage rates are rising, Home Decorator magazine [#permalink]

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New post 22 May 2017, 07:00
livelyangel wrote:
I want to ask about answer E
E. Production costs for the magazine are expected to remain stable.
The question says that: magazine's profits are likely to decline if the plan is instituted
Profits = revenue - cost
To reduce profits, we need to reduce revenue or/and increase or keep costs the same.
So E potentially reduces the profits
Why is E not an answer?


IMHO, the problem here is that you're assuming that revenue is reduced while it is not mentioned in the stimulus. And reduction in revenue (because of decrease in advertisement, as expressed in option D) is exactly correct choice we need to choose. Can (E) is right without (D)? No. That's why (E) is wrong, and (D) is right.

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New post 08 Jun 2017, 19:16
the first step is to identify question type, "provide evidences" indicate that the question will be either weaken or strengthen, unless the question goes with additional key words, such as "except", "to evaluate", "infer", "explain". In the latter situation, it can be a mix-type question.

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New post 08 Jun 2017, 19:26
the question really has many targets to attack so that test takers get confused.
1/ "advertisers" is different from "advertising payments", and "advertisers" here plays its role as customers, not expenditure.
2/ the question that does not lie in the passage asks about the plan, not about the argument in the passage.
3/ the option A offers a little bit of calculation for the impact on the budget of the plan, but the calculation actually has nothing to do with the loss of the profit.

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New post 12 Jun 2017, 07:38
Because postage rates are rising, Home Decorator magazine plans to maximize its profits by reducing by one half the number of issues it publishes each year. The quality of articles, the number of articles published per year, and the subscription price will not change. Market research shows that neither subscribers nor advertisers will be lost if the magazine's plan is instituted.

Which of the following, if true, provides the strongest evidence that the magazine's profits are likely to decline if the plan is instituted?


(A) With the new postage rates, a typical issue under the proposed plan would cost about one-third more to mail than a typical current issue would. -- this is given above and is the reason why the plan of reducing the issues is made.
(B) The majority of the magazine's subscribers are less concerned about a possible reduction in the quantity of the magazine's articles than about a possible loss of the current high quality of its articles. -- quality will stay the same, so no worries on this and therefore the profits will not decline as customers will get the quality they desire
(C) Many of the magazine's long-time subscribers would continue their subscriptions even if the subscription price were increased. -- we are not talking about increase in subscription price, so not relevant
(D) Most of the advertisers that purchase advertising space in the magazine will continue to spend the same amount on advertising per issue as they have in the past. -- Ok if they spend the same amount PER issue, and the issues are reduced, then of course less profits will be made through the advertiser´s purchase of advertising space. For example, they pay 100 for 10 issues, implies 1000 is the revenue generated.. but once the plan of reducing the issues is implemented, they pay 100 for (say) 5 issues, implying 500 will be the revenue generated.. Loss of Revenue = 1000 - 500 = 500.. CORRECT option
(E) Production costs for the magazine are expected to remain stable -- This strengthens the plan in a way because after the plan is implemented, you will pay less for production than you are paying at present
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Because postage rates are rising, Home Decorator magazine [#permalink]

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New post 08 Aug 2017, 21:49
******GOOD QUESTION******

Because postage rates are rising, Home Decorator magazine plans to maximize its profits by reducing by one half the number of issues it publishes each year. The quality of articles, the number of articles published per year, and the subscription price will not change. Market research shows that neither subscribers nor advertisers will be lost if the magazine's plan is instituted.

Thorough explanation of the above argument : --
*Magazines Issue is equivalent to a newsletter, publication, edition etc..
**Postage rate is amount of money charged by a governmental postal service to ship and deliver mail.
Scenario - Suppose a magazine publishes 12 issues/publications/newsletters per year, so now it will publish 6 issues/publications/newsletters per year. Reason - postage rates are rising, and Home Decorator magazine plans to maximize its profits.
What about the other things?? Will REMAIN SAME. (The quality of articles, the number of articles published per year, and the subscription price will not change. )
Alert - Don't confuse yourself with the difference between the issues and the articles. As I did when I first attempted this question.
Conclusion - Plan is good. Question - Plan is bad??

Which of the following, if true, provides the strongest evidence that the magazine's profits are likely to decline if the plan is instituted?

CONCLUSION -- IF PLAN IS INSTITUTED, THE PROFITS ARE LIKELY TO DECLINE. Therefore, the plan is bad.

PROFITS = REVENUE - COSTS.
i. Profits will decline if the COSTS GO UP SUBSTANTIALLY
ii. Profits will increase if the REVENUE GOES UP SIGNIFICANTLY


(A) With the new postage rates, a typical issue under the proposed plan would cost about one-third more to mail than a typical current issue would.
This option is talking about the mailing costs;
current postage rate - $3
new postage rate - $4 (as per this option details)

Issues earlier (suppose as) - 10, therefore, Mailing cost -- 10*3 = 30
Issues now (will be half) - 5 -- Mailing cost -- 5*4 = 20
Thus, the cost is getting reduced itself. Therefore, the profits will increase instead, keeping the revenue same.

Explanation by RON,
they're only going to send out half as many issues. therefore, unless the cost of postage doubles, they're actually going to spend less money on postage than they did before.

choice (a) says that postage will cost only 1/3 more - far less than double. therefore, choice (a) actually implies that the total cost of postage will go down. this is exactly the opposite of what you want.

it may help to set specific numbers to the values in question.
let's say that they currently send out 10 issues per year, and that postage currently costs $3 per issue.
this is a total cost of $30 for postage.

if they cut the number of issues in half, to 5, than the postage would have to double (to $6/issue) to amount to the same total of $30.

if the postage increase is only 1/3, then the cost of postage per issue will only rise to $4. if only five issues per year are then sent out, the total cost of postage will fall from its original value ($30) to a new value of 5 x $4 = $20.


(B) The majority of the magazine's subscribers are less concerned about a possible reduction in the quantity of the magazine's articles than about a possible loss of the current high quality of its articles.
The magazine's subscribers concerns are valid and they need to be rest assured that there will no loss of the current high quality, as it is directly mentioned in the argument that quality will not change. So, incorrect. Also, this does not proves why the plan is bad.

(C) Many of the magazine's long-time subscribers would continue their subscriptions even if the subscription price were increased.
This option statement answers the what if scenario. But the subscription price will not change as per the argument. So we are not concerned about this scenario. Its irrelevant.
Also, this option does not proves why the plan is bad.


Options B and C are going against the facts mentioned in the argument itself. So, both of them are irrelevant.

(D) Most of the advertisers that purchase advertising space in the magazine will continue to spend the same amount on advertising per issue as they have in the past.
Home Decorator magazine’s profits would be likely to decline if, as a result of instituting the plan, revenues were to decrease substantially. Choice D indicates that the plan would produce substantially lower revenues because most advertisers will pay the magazine the same amount per issue, but there will be only half as many issues. Therefore, D is the best answer
Earlier Scenario -
No. of Issues per year - 12
postage rates per issue - $3
no. of advertising space purchased by advertisers per issue - 10
amount on advertising per issue earlier - 1 * 3 * 10 = $30
amount on advertising earlier - $ (12 * 30) - $360

Current Scenario -
No. of Issues per year - 6
postage rates per issue - $8
no. of advertising space purchased by advertisers per issue - 10 * 2 = 20 (as number of articles will still be the same, so it will double, as no. of issues reduced by half)
amount on advertising per issue now - $30 (As per this option, its same as earlier)
But calculation as per current scenario - 1*8*20 = $160 ,
amount on advertising now - $(6 * 160) - $960 (the amount which the advertisers needs to pay now, but they are paying the same amount as earlier.)
Thus this will result in a loss for magazine's profits. Thus, plan is bad and this is the correct option.

(E) Production costs for the magazine are expected to remain stable.
Profit = (Sales Revenue - Production Costs), just knowing the production costs we cannot comment on the profits. We need to know about the sales revenue as well to comment on the profit. We don't have enough information on the same. Incorrect.
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Re: Because postage rates are rising, Home Decorator magazine [#permalink]

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New post 04 Sep 2017, 03:50
Because postage rates are rising, Home Decorator magazine plans to maximize its profits by reducing by one half the number of issues it publishes each year. The quality of articles, the number of articles published per year, and the subscription price will not change. Market research shows that neither subscribers nor advertisers will be lost if the magazine's plan is instituted.

Which of the following, if true, provides the strongest evidence that the magazine's profits are likely to decline if the plan is instituted?

(A) With the new postage rates, a typical issue under the proposed plan would cost about one-third more to mail than a typical current issue would. - Strengthener - since HD will send out half as many issues. therefore, unless the cost of postage doubles, they're actually going to spend less money on postage than they did before.
(B) The majority of the magazine's subscribers are less concerned about a possible reduction in the quantity of the magazine's articles than about a possible loss of the current high quality of its articles. - Irrelevant - since The quality of articles, the number of articles published per year, and the subscription price will not change
(C) Many of the magazine's long-time subscribers would continue their subscriptions even if the subscription price were increased. - Irrelevant
(D) Most of the advertisers that purchase advertising space in the magazine will continue to spend the same amount on advertising per issue as they have in the past. - Correct - total amount spent on advertising depends on number of issues .
(E) Production costs for the magazine are expected to remain stable - Out of scope

Answer D
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Re: Because postage rates are rising, Home Decorator magazine [#permalink]

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New post 04 Sep 2017, 08:11
Because postage rates are rising, Home Decorator magazine plans to maximize its profits by reducing by one half the number of issues it publishes each year. The quality of articles, the number of articles published per year, and the subscription price will not change. Market research shows that neither subscribers nor advertisers will be lost if the magazine's plan is instituted.

Which of the following, if true, provides the strongest evidence that the magazine's profits are likely to decline if the plan is instituted?

(A) With the new postage rates, a typical issue under the proposed plan would cost about one-third more to mail than a typical current issue would. -This will strengthen the argument. Since if the production is cut to half, then the costs will go down by half. Consecutively, if the mailing cost increases by one third then still it will be cheaper for the company to publish the magazine than before.
(B) The majority of the magazine's subscribers are less concerned about a possible reduction in the quantity of the magazine's articles than about a possible loss of the current high quality of its articles. -The quantity won't reduce. This is opposite of the premise.
(C) Many of the magazine's long-time subscribers would continue their subscriptions even if the subscription price were increased. -This will strengthen the argument. Since the magazine could make even more profit.
(D) Most of the advertisers that purchase advertising space in the magazine will continue to spend the same amount on advertising per issue as they have in the past. -Correct. Since the advertising revenue is generated per issue, the revenue will go down. This is because the number of issues will be decreasing.
(E) Production costs for the magazine are expected to remain stable -This will strengthen the argument.
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