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# Leo can buy a certain computer for p1 dollars in State A,

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VP
Joined: 22 Nov 2007
Posts: 1079
Leo can buy a certain computer for p1 dollars in State A, [#permalink]

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08 Jan 2008, 06:21
This topic is locked. If you want to discuss this question please re-post it in the respective forum.

Leo can buy a certain computer for p1 dollars in State A, where the sales tax is t1 percent, or he can buy the same computer for p2 dollars in State B, where the sales tax is t2 percent. Is the total cost of the computer greater in State A than in State B?

(1) t1 > t2
(2) p1t1 > p2t2
Director
Joined: 12 Jul 2007
Posts: 858

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08 Jan 2008, 06:58

1. Tax rate alone doesn't tell us anything
2. Tax on each doesn't tell us anything
Together they still don't tell us anything

Computer 1 could be $100 with a 50% tax, while Computer 2 could be$500 with a 1% tax OR
Computer 1 could be $500 with a 10% tax, while Computer 2 could be$100 with a 1% tax

Both situations follow all the rules, but you get different answers for the total cost of the computers.
Director
Joined: 09 Jul 2005
Posts: 591

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09 Jan 2008, 04:40
This a bit strange for us international students. For me, the answer should be B since in Europe all the prices you can see around include taxes. therefore, when asked about how much the item costs I consider that the pirce it costs includes taxes.
SVP
Joined: 04 May 2006
Posts: 1895
Schools: CBS, Kellogg

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09 Jan 2008, 06:36
eschn3am wrote:

1. Tax rate alone doesn't tell us anything
2. Tax on each doesn't tell us anything
Together they still don't tell us anything

Computer 1 could be $100 with a 50% tax, while Computer 2 could be$500 with a 1% tax OR
Computer 1 could be $500 with a 10% tax, while Computer 2 could be$100 with a 1% tax

Both situations follow all the rules, but you get different answers for the total cost of the computers.

Thank you, yr approach help to elimilate my stupid
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Director
Joined: 09 Jul 2005
Posts: 591

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09 Jan 2008, 14:30
marcodonzelli wrote:
automan wrote:
This a bit strange for us international students. For me, the answer should be B since in Europe all the prices you can see around include taxes. therefore, when asked about how much the item costs I consider that the pirce it costs includes taxes.

OA is E indeed

Obviously OA is not B. I have never seen a GMAT question asking me to calculate x and then telling me that x=4, for example.

I hate the type of questions you are suppose to know more that maths to be able to resolve it...
Intern
Joined: 30 Oct 2007
Posts: 7

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10 Jan 2008, 09:42
OA might be E but why not B?

Total cost= Cost of product and the Tax , in Country A P1 is the price and T1 is the tax total cost together is P1t1 similary in Country B the total coast is P2T2
B choice says P1T1 > P2T2 - is this not the staright answer?

Where am I wrong? Is my approach wrong
Director
Joined: 12 Jul 2007
Posts: 858

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10 Jan 2008, 09:46
gmatprep12 wrote:
OA might be E but why not B?

Total cost= Cost of product and the Tax , in Country A P1 is the price and T1 is the tax total cost together is P1t1 similary in Country B the total coast is P2T2
B choice says P1T1 > P2T2 - is this not the staright answer?

Where am I wrong? Is my approach wrong

because P1T1 = tax on P1 and P2T2 = tax on P2

you're thinking of 1+T1 and 1+T2. As it stands now, if the tax rate is 5% then T1 will be .05 and not 1.05. You need that 1 in there to maintain the cost and ADD the tax. As it stands now we're just getting the tax, and still need to know the base price to get the total cost.
CEO
Joined: 17 Nov 2007
Posts: 3583
Concentration: Entrepreneurship, Other
Schools: Chicago (Booth) - Class of 2011
GMAT 1: 750 Q50 V40

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10 Jan 2008, 09:57
By the way, does anybody know a good book about US tax system for dummies?
Thanks.
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Director
Joined: 12 Jul 2007
Posts: 858

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10 Jan 2008, 09:59

CEO
Joined: 17 Nov 2007
Posts: 3583
Concentration: Entrepreneurship, Other
Schools: Chicago (Booth) - Class of 2011
GMAT 1: 750 Q50 V40

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10 Jan 2008, 11:07
eschn3am wrote:

WOW
+1

Thanks!
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Director
Joined: 09 Jul 2005
Posts: 591

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10 Jan 2008, 11:23
walker wrote:
eschn3am wrote:

WOW
+1

Thanks!

Director
Joined: 12 Jul 2007
Posts: 858

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10 Jan 2008, 11:28

read up on it before you buy it! I'm sure it's all about filing tax returns and things of that nature, not a comprehensive review of the US tax code
CEO
Joined: 17 Nov 2007
Posts: 3583
Concentration: Entrepreneurship, Other
Schools: Chicago (Booth) - Class of 2011
GMAT 1: 750 Q50 V40

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10 Jan 2008, 11:33
eschn3am wrote:

read up on it before you buy it! I'm sure it's all about filing tax returns and things of that nature, not a comprehensive review of the US tax code

hihi...I've found pdf and skiped through. I guess it is good to start with individual taxes rather than corporate taxes.
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Director
Joined: 12 Jul 2007
Posts: 858

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10 Jan 2008, 11:41
walker wrote:
eschn3am wrote:

read up on it before you buy it! I'm sure it's all about filing tax returns and things of that nature, not a comprehensive review of the US tax code

hihi...I've found pdf and skiped through. I guess it is good to start with individual taxes rather than corporate taxes.

haha, definitely. much more manageable, as well as practical, if you're just starting out in the world of US taxes
Director
Joined: 09 Jul 2005
Posts: 591

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10 Jan 2008, 14:25
eschn3am wrote:
walker wrote:
eschn3am wrote:

read up on it before you buy it! I'm sure it's all about filing tax returns and things of that nature, not a comprehensive review of the US tax code

hihi...I've found pdf and skiped through. I guess it is good to start with individual taxes rather than corporate taxes.

haha, definitely. much more manageable, as well as practical, if you're just starting out in the world of US taxes

The most funny tax in the states is tip....
Director
Joined: 12 Jul 2007
Posts: 858

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10 Jan 2008, 14:58
that or the lottery ie. the stupid people tax
Director
Joined: 09 Jul 2005
Posts: 591

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10 Jan 2008, 15:22
eschn3am wrote:
that or the lottery ie. the stupid people tax

It seemed funny to me to pay 15% on tip and 8% on taxes.... How much is the one on lottery?
Director
Joined: 12 Jul 2007
Posts: 858

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10 Jan 2008, 16:20
automan wrote:
eschn3am wrote:
that or the lottery ie. the stupid people tax

It seemed funny to me to pay 15% on tip and 8% on taxes.... How much is the one on lottery?

Yeah, tipping is just a way for certain places to pass costs on to the consumer, whether they're warranted or not.

The "stupid people tax" is a joke in America. Since your chances of winning the lottery are around 1:20,000,000 the joke is that people who play the lottery are stupid and are throwing their money away...in other words the lottery is a tax on stupid people
Senior Manager
Joined: 22 Sep 2005
Posts: 276

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11 Jan 2008, 15:58
Great question!!!!
Re: inequalities   [#permalink] 11 Jan 2008, 15:58
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