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In the year following an 8-cent increase in the federal tax

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In the year following an 8-cent increase in the federal tax [#permalink]

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26 Nov 2006, 18:10
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In the year following an 8-cent increase in the federal tax on a pack of cigarettes, sales of cigarettes fell 10%. In contrast, in the year prior to the tax increase, sales had fallen 1%. The volume of cigarette sales is therefore strongly related to the after-tax price of a pack of cigarettes.

The argument above requires which of the following assumptions?

A. During the year following the tax increase, the pretax price of a pack of cigarettes did not increase by as much as it had during the year prior to the tax increase.

B. The one percent fall in cigarette sales in the year prior to tax increase was due to a smaller tax increase.

C. The pretax price of a pack of cigarettes gradually decreased throughout the year before and the year after the tax increase.

D. For the year following the tax increase, the pretax price of a pack if cigarettes were not eight or more cents lower than it had been the previous year.

E. As the after-tax price of a pack of cigarettes rises, the pretax price also rises.
[Reveal] Spoiler: OA

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Last edited by Skywalker18 on 25 Sep 2016, 21:16, edited 1 time in total.

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Re: In the year following an 8-cent increase in the federal tax [#permalink]

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26 Nov 2006, 21:00
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D but not confident....

Tried negation but wording is too quirky

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Re: In the year following an 8-cent increase in the federal tax [#permalink]

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26 Nov 2006, 21:47
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Swagatalakshmi wrote:
In the year following an 8-cent increase in the federal tax on a pack of cigarettes, sales of cigarettes fell 10%. In contrast, in the year prior to the tax increase, sales had fallen 1%. The volume of cigarette sales is therefore strongly related to the after-tax price of a pack of cigarettes.

The argument above requires which of the following assumptions?

A. During the year following the tax increase, the pretax price of a pack of cigarettes did not increase by as much as it had during the year prior to the tax increase.

B. The one percent fall in cigarette sales in the year prior to tax increase was due to a smaller tax increase.

C. The pretax price of a pack of cigarettes gradually decreased throughout the year before and the year after the tax increase.

D. For the year following the tax increase, the pretax price of a pack if cigarettes were not eight or more cents lower than it had been the previous year.

If the pretax price was less than 8 cents or more then the increase in tax would not have any impact and that impact can't be attributed to drop in sales. Tax can have impact only when there is overall increase in the price.

E. As the after-tax price of a pack of cigarettes rises, the pretax price also rises.

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Re: In the year following an 8-cent increase in the federal tax [#permalink]

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26 Nov 2006, 23:33
prefer D 2, as explained by ak.

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Re: In the year following an 8-cent increase in the federal tax [#permalink]

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27 Nov 2006, 00:41
Swagatalakshmi wrote:
In the year following an 8-cent increase in the federal tax on a pack of cigarettes, sales of cigarettes fell 10%. In contrast, in the year prior to the tax increase, sales had fallen 1%. The volume of cigarette sales is therefore strongly related to the after-tax price of a pack of cigarettes.

The argument above requires which of the following assumptions?

A. During the year following the tax increase, the pretax price of a pack of cigarettes did not increase by as much as it had during the year prior to the tax increase.

B. The one percent fall in cigarette sales in the year prior to tax increase was due to a smaller tax increase.

C. The pretax price of a pack of cigarettes gradually decreased throughout the year before and the year after the tax increase.

D. For the year following the tax increase, the pretax price of a pack if cigarettes were not eight or more cents lower than it had been the previous year.

E. As the after-tax price of a pack of cigarettes rises, the pretax price also rises.

Agree with D after reading ak_idc explaination. But I think a verb is missing in D hence this doesn't convey meaning well..Any comments?

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Re: In the year following an 8-cent increase in the federal tax [#permalink]

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27 Nov 2006, 02:55
Agree D

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Re: In the year following an 8-cent increase in the federal tax [#permalink]

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27 Nov 2006, 13:59
ak_idc wrote:
Swagatalakshmi wrote:
In the year following an 8-cent increase in the federal tax on a pack of cigarettes, sales of cigarettes fell 10%. In contrast, in the year prior to the tax increase, sales had fallen 1%. The volume of cigarette sales is therefore strongly related to the after-tax price of a pack of cigarettes.

The argument above requires which of the following assumptions?

A. During the year following the tax increase, the pretax price of a pack of cigarettes did not increase by as much as it had during the year prior to the tax increase.

B. The one percent fall in cigarette sales in the year prior to tax increase was due to a smaller tax increase.

C. The pretax price of a pack of cigarettes gradually decreased throughout the year before and the year after the tax increase.

D. For the year following the tax increase, the pretax price of a pack if cigarettes were not eight or more cents lower than it had been the previous year.

If the pretax price was less than 8 cents or more then the increase in tax would not have any impact and that impact can't be attributed to drop in sales. Tax can have impact only when there is overall increase in the price.

E. As the after-tax price of a pack of cigarettes rises, the pretax price also rises.

To discourage smokers, govt could increase the sale tax for cigarettes too.

So I'm unable to decide between A and D.

What's wrong in A?

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Re: In the year following an 8-cent increase in the federal tax [#permalink]

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27 Nov 2006, 14:43
I am going with B.

B says that the sales fell in the previous year because of a smaller tax increase. An inverse relationship between sales and tax is thus established. Applying this to the question, a larger increase in tax would further decrease the sales.

What is wrong with B?

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Re: In the year following an 8-cent increase in the federal tax [#permalink]

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27 Nov 2006, 15:23
Swagatalakshmi wrote:
In the year following an 8-cent increase in the federal tax on a pack of cigarettes, sales of cigarettes fell 10%. In contrast, in the year prior to the tax increase, sales had fallen 1%. The volume of cigarette sales is therefore strongly related to the after-tax price of a pack of cigarettes.

The argument above requires which of the following assumptions?

A. During the year following the tax increase, the pretax price of a pack of cigarettes did not increase by as much as it had during the year prior to the tax increase.

B. The one percent fall in cigarette sales in the year prior to tax increase was due to a smaller tax increase.

C. The pretax price of a pack of cigarettes gradually decreased throughout the year before and the year after the tax increase.

D. For the year following the tax increase, the pretax price of a pack if cigarettes were not eight or more cents lower than it had been the previous year.

E. As the after-tax price of a pack of cigarettes rises, the pretax price also rises.

D
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Re: In the year following an 8-cent increase in the federal tax [#permalink]

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27 Nov 2006, 18:03
OA=D
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Re: In the year following an 8-cent increase in the federal tax [#permalink]

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06 Aug 2011, 12:42
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Re: In the year following an 8-cent increase in the federal tax [#permalink]

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06 Aug 2011, 12:56
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If the pre tax price was 8 or more cents lower. Cigarettes would cost just as much or less than they did before. If thats true then the conclusion cannot stand on its own. After tax price would not be the cause of slower sales .
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Re: In the year following an 8-cent increase in the federal tax [#permalink]

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19 Aug 2011, 19:12
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http://www.manhattangmat.com/forums/pac ... t7354.html
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Re: In the year following an 8-cent increase in the federal tax [#permalink]

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19 Aug 2011, 19:32
@ gijoedude the link you posted has a different ques. STRENGTH. Discussion here is assumption.

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Re: In the year following an 8-cent increase in the federal tax [#permalink]

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19 Aug 2011, 23:11
D

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Re: In the year following an 8-cent increase in the federal tax [#permalink]

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26 Nov 2011, 23:42
Why not B ?
Also A is very confusing
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Re: In the year following an 8-cent increase in the federal tax [#permalink]

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26 Nov 2011, 23:44
gijoedude wrote:

the choices are different in this mahattan post ... it is a different question ..
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Re: In the year following an 8-cent increase in the federal tax [#permalink]

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27 Nov 2011, 08:16
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Went with D.

This is a perfect question to apply Assumption negation technique to find the correct assumption. Choices B and D are contenders. Negating the choices, it is clear that B will not have any affect on the conclusion. D on the other hand would weaken the conclusion considerably. D wins !!!

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Re: In the year following an 8-cent increase in the federal tax [#permalink]

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27 Nov 2011, 12:21
hard!
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Re: In the year following an 8-cent increase in the federal tax [#permalink]

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13 Dec 2011, 00:09
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Practicegmat wrote:
Why not B ?
Also A is very confusing

The premise: tax fee/pack of cigarette = 8 cent ==> sales decrease 10%
no tax ===> sales decrease only 1%

Conclusion: Tax correlate with sales

I will negate A and B:
A. During the year following the tax increase, the pretax price of a pack of cigarettes INCREASED by as much as it had during the year prior to the tax increase.

Last: pretax price 110 cent (increase 10 cent from 100 cent in the previous year) => price after tax: 118
Now: pretax price 120 cent (also increase 10 cent) => price after tax: 128

This fact does not reflect add tax into pretax price of cigarette pack will make the sale decrease

B. The one percent fall in cigarette sales in the year prior to tax increase was due to a smaller tax increase.

In contrast, in the year prior to the tax increase, sales had fallen 1%. (from the argument). In fact the year before tax increase, there is no tax increase. The tax keep constant. That explains why choice B is wrong answer.
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Re: In the year following an 8-cent increase in the federal tax   [#permalink] 13 Dec 2011, 00:09

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