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# In the year following an eight-cent increase in the federal

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Manager
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In the year following an eight-cent increase in the federal [#permalink]

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15 Jul 2005, 17:20
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In the year following an eight-cent increase in the federal tax on a pack of cigarettes, sales of cigarettes fell ten percent. In contrast, in the year prior to the tax increase, sales had fallen one percent. 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 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 of cigarettes was 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.
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15 Jul 2005, 19:50
cybera wrote:
In the year following an eight-cent increase in the federal tax on a pack of cigarettes, sales of cigarettes fell ten percent. In contrast, in the year prior to the tax increase, sales had fallen one percent. 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 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 of cigarettes was 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.

I'd go with A by negation test.

If you negate A (the pretax price of a pack of cigarettes DID increase by as much as it had during the year prior to the tax increase), then the reason for stating that the sales decrease was due to the 8 cent rise in tax is scattered.
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16 Jul 2005, 04:19
Picked B ( but not convinced myself).

To-conclude the after-tax prices ( rather than prices per-se) affect sales, we need to have data for at-lest two instances of such a correlation.

HMTG.
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16 Jul 2005, 12:47
OA is D...

If D is not correct then increasing the tax by 8 cents may not have a major effect..
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19 Jul 2005, 09:54
You are right Cybera, the Answer has to be D. I actually chose A. I read the question incorrectly, and thought that the tax increase was 8%. Thats why I rejected D. I gotta be careful.
19 Jul 2005, 09:54
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# In the year following an eight-cent increase in the federal

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