KalEl wrote:
Still don't understand why A is right?
Hi KalEl. I'm glad to help.
This question is tough. OA is A.
ANALYZE THE STIMULUS:Fact: In Gandania, the government has a monopoly on tobacco sales,
Fact: However, Profits from tobacco sales account for 10% of Gandania's annual revenues.
Conclusion: Gandania cannot afford to institute the proposed laws.
The KEY of this question is the formula:
GOV NET INCOME = GOV REVENUE - GOV EXPENSES.The author says sales from tobacco account 10% of Government Revenue ==> He concludes that if the proposed laws are instituted ==> Gov Revenues decrease ==> Net Income will decrease ==> Government CAN NOT afford to institute these laws.
The assumption is: Government expenses will not decrease or stay the same after the proposed laws are instituted.What if: The new laws make Government Revenue decrease, say 10%, but
they also make Government Expenses decrease, say greater than 10% ==> Government Net Income will increase. That's the KEY.
ANALYZE EACH ANSWER:
A) All health care in gandania is government-funded.
Correct. Even the new laws make government revenues decrease, but what if they
also make government expenses DECREASE too (because the government
CAN DECREASE its expenses for health care regarding tobacco issues.) ==> Government Net income may not decrease or even increase.
B) Implementing the proposed laws is not likely to cause significant increase in the amount of tobacco gandania exports.
Wrong. Total sales = Domestic sales + Exports ==> New laws make both domestic sales and export decrease ==> Government total revenue will decrease for sure.
C) The percentage of revenue gandania recieves from tobaco sales has remained steady in recent years.
Wrong. Does not affect at all.
"remain steady in recent years" does not mean "remain forever".
D) profits from tobaco sales far surpass any other single source of revenue for the gandandian government.
Wrong. If profits from tobacco sales are much greater than any other source ==>
their decline will make a big shortfall of government revenue in the future.
E) No government official in gandania has ever previously proposed laws aimed at curtailing tobacco use.
Wrong. Out of scope for sure.TAKEAWAY:In real GMAT, when you see questions regarding Profit, Expenses, Revenue, Costs.....
* If the questions have
ONLY profit/revenues ==> Make conclusion ==> Think about the opposite side: Costs/Expenses
* If the questions have
ONLY Costs/Expenses ==> Make conclusion ==> Think about the opposite side: Revenue/Profit.
Hope it helps