Earlier this year, the government raised the minimum wage for teenager

Question

Earlier this year, the government raised the minimum wage for teenagers. Since the staff in Pizzarella pizza parlor consists almost entirely of teenagers, the owners of Pizzarella faced higher expenses. However, Pizzarella's profit has increased by 20 percent.

Which of the following, if true, could best resolve this paradox?

Which of the following, if true, could best resolve this paradox?

A. More and more teenagers are interested in being employed by Pizzarella.

B. The prices of tomatoes, flour, oil and cheese - the main ingredients in Pizzarella's pizzas - have also risen sharply.

C. Pizzarella had a scandalous disagreement with the health department which was publicized, damaging its client base.

D. With the teenage minimum wage raised, more teenagers - Pizzarella's chief target market - could afford to dine there.

E. Pizzarella's sign fell off during a thunderstorm and had to be repaired.

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bruhletmein · Answer

Hasn't been answered yet so let me present my two cents:

Essentially the paradox is that the Pizzarella Pizza (P) employs many teenagers and as the minimum wage for teenagers has gone up, their costs have gone up. But their profit has become higher. So what would help us resolve this?

Some 5 second pre-work: Knowing that profit = revenue - costs, I tried making some quick mental guesses after reading the passage. If revenue goes up faster than wage expenses increase OR if somehow there were other costs involved which decreased more than the wage costs increased as a result of the rise in minimum wage, then their profit would have increased. Now let's go to the options:

(A) More and more teenagers are interested in being employed by Pizzarella.
This doesn't tell us anything about increasing profit and in fact it says nothing about the costs either. Just bc they were interested doesn't mean P has hired them. And even if they did hire all the teenagers that were interested, all else being equal their profit should have gone down. Out

(B) The prices of tomatoes, flour, oil and cheese - the main ingredients in Pizzarella's pizzas - have also risen sharply.
Again, if anything this would increase their costs and reduce their profits further. Out

(C) Pizzarella had a scandalous disagreement with the health department which was publicized, damaging its client base.
This one requires several implicit assumptions and at the end is still wrong. Let me show you. First you have to assume that the average revenue per pizza is the same. It may be the case that even though their overall client base goes down, they somehow retain most of the loyal customer base who are happy to pay an increased prices so that there is no impact on revenue. It also assumes that this effect took place at the same time as the wage costs going up, which is not necessarily made clear in the option - this scandal could have happened months or years before they had to increase minimum wage which would have had no impact on this period's profit. Finally, even if you assume that the revenue per pizza remains the same AND it took place at the same time, damaging the client base reduces revenue and thus should reduce profit. Out

(D) With the teenage minimum wage raised, more teenagers - Pizzarella's chief target market - could afford to dine there.
I like this one. What this is saying is that with the minimum wage increase, teenagers have more money to spend eating at P. And so if more teenagers eat at P, they will generate more revenue, even if they have to pay more to their employees, they will likely make that back and more, as teenagers are their target market for generating revenue. Thus this will increase profit. Keep it for now

(E) Pizzarella's sign fell off during a thunderstorm and had to be repaired.
This one increases costs without showing any other effect. If anything, it will decrease profit. Out

So the best out of the above is  D IMO

Dereno · Answer

The question mentions that Previously, the government has raised the minimum wages for teenagers. The pizza parlour - Pizzarella has a staff group ALMOST entirely of teenagers. So, there must be an increase in staff wages.

But, despite the increase in staff wages, the PROFIT of the pizza parlour - Pizzarella has increased by 20%.

How can this happen ?

There can be several reasons where

1) The price of pizza sold can be greater OR

2) There can be an introduction of new items to the menu, which could have boosted the sales by attracting more people OR

3) The pizza parlour could have offered a discounted sale or marketing combo packs which could have made profits OR

4) There could have been a festival season which could have attracted more people to the cities to boost sales. OR

5) May be existing shops could have closed for some reasons, and there might have been a monopoly in the market controlled by Pizzarella. OR

6) The pizzarella company could have got some prestigious awards , which would have attracted the attention of more people to explore it.

Let’s look into the options :

A. More and more teenagers are interested in being employed by Pizzarella.

More teenagers being employed will eventually result in more wages dispensed. Thus, the profit might drop, considering the sales and price has been the same as previous.

B. The prices of tomatoes, flour, oil and cheese - the main ingredients in Pizzarella's pizzas - have also risen sharply.

The increase in cost of raw materials, could have resulted in the end product being high. Rising the prices of the raw materials , could have lessened the profit margin to a greater extent.

C. Pizzarella had a scandalous disagreement with the health department which was publicized, damaging its client base.

Option C mentions a scandalous disagreement with health officials which resulted in negative publicity, which will eventually result in the drop of Sales or profits. Hence, wrong

D. With the teenage minimum wage raised, more teenagers - Pizzarella's chief target market - could afford to dine there.

Even with the increase in teenage minimum wage, the target audience would afford to dine more, which would have eventually increased the profits and sales. Hence, the correct answer.

E. Pizzarella's sign fell off during a thunderstorm and had to be repaired.

Since a sign fell off during the thunderstorm, doesn’t mean the sales or pizzarella has declined. Hence, wrong.

Option D

Bunuel · Answer

OFFICIAL EXPLANATION

Earlier this year, the government raised the minimum wage for teenagers. Since the staff in Pizzarella pizza parlor consists almost entirely of teenagers, the owners of Pizzarella faced higher expenses. However, Pizzarella's profit has increased by 20 percent.

Which of the following, if true, could best resolve this paradox?

Which of the following, if true, could best resolve this paradox?

A. More and more teenagers are interested in being employed by Pizzarella.

Incorrect.

This is a Paradox question, so it is made up of premises only; you need to find a new premise which best resolves the apparent discrepancy between the existing premises:

Premise A: the government raised the minimum wage for teenage workers
 +
Premise B: since most of the Pizzarella employees are teenagers, the expenses were higher
 ✖
Premise C: Pizzarella's profit was higher

Resolving Premise: ?

This argument includes two of three parameters of the profit formula - expenses and profit. Therefore, we are looking for an answer choice which deals with the third parameter - revenues.

This answer choice tells us that there was a great supply of teenage workers after their minimum wage was raised. However, this tells us nothing about the profit, expenses or revenues of Pizzarella.

B. The prices of tomatoes, flour, oil and cheese - the main ingredients in Pizzarella's pizzas - have also risen sharply.

Incorrect.

This answer choice tells us that the expenses of Pizzarella have grown even further than they did due to the rise in the teenage minimum wage. This emphasizes the paradox because we would expect profit to diminish following a rise in expenses.

C. Pizzarella had a scandalous disagreement with the health department which was publicized, damaging its client base.

Incorrect.

This answer choice tells us that fewer clients have been coming to Pizzarella, meaning its revenues dropped. Let's take a look at the formula:

profit = revenues - expenses

If profit has risen and expenses have also risen, then the only way to explain this is that revenues have risen as well. However, according to this answer choice, Pizzarella's revenues have dropped this year. Therefore, this answer choice emphasizes the paradox rather than resolves it.

D. With the teenage minimum wage raised, more teenagers - Pizzarella's chief target market - could afford to dine there.

The argument tells us that Pizzarella's expenses have risen but that its profit has also risen. If profit has risen and expenses have also risen, then the only way to explain this is that revenues have risen as well. This answer choice explains how it happened - more teenagers could afford to dine at Pizarella.

E. Pizzarella's sign fell off during a thunderstorm and had to be repaired.

Incorrect.

This is a Paradox question, so it is made up of premises only; you need to find a new premise which best resolves the apparent discrepancy between the existing premises:

Premise A: the government raised the minimum wage for teenage workers
 +
Premise B: since most of the Pizzarella employees are teenagers, the expenses were higher
 ✖
Premise C: Pizzarella's profit was higher

Resolving Premise: ?

This argument includes two of three parameters of the profit formula - expenses and profit. Therefore, we are looking for an answer choice which deals with the third parameter - revenues.

This answer choice tells us that in addition to the rise in expenses caused by the rise in minimum wage, Pizzarella faced more expenses as a result of the damage caused to the sign. Thus, this answer choice emphasizes the paradox.

Earlier this year, the government raised the minimum wage for teenager

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GMAT Critical Reasoning (CR) Questions

Earlier this year, the government raised the minimum wage for teenager

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