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# Over the past few years, retailers in the town of

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Senior Manager
Status: Final Lap
Joined: 25 Oct 2012
Posts: 286
Concentration: General Management, Entrepreneurship
GPA: 3.54
WE: Project Management (Retail Banking)
Over the past few years, retailers in the town of [#permalink]

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25 Jun 2013, 02:21
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40% (03:05) correct 60% (02:11) wrong based on 441 sessions

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Over the past few years, retailers in the town of Statesville have suffered from decreasing sales, largely because increasing numbers of consumers, after seeing items in stock at those retailers' stores, have opted instead to purchase those items on the Internet. As a result, Statesville's local government revenues have been impacted as well. To make up the lost revenue, Statesville's mayor has proposed legislation that would require Internet retailers to charge and remit local sales taxes on all orders shipped to addresses in Statesville, at the same tax rate assessed on purchases in physical stores. If this legislation is enacted, the mayor reasons, Statesville will be able to bring its revenue back up to the level of a few years ago.

All of the following, if true, cast doubt on the mayor's conclusion EXCEPT

(A) Because they do not need to rent or maintain physical showrooms, Internet retailers generally charge substantially lower prices for most items than do physical stores.

(B) The vast majority of Statesville's residents have at least one trusted friend or family member who lives in one of the smaller towns surrounding Statesville and whom they would trust to receive their packages.

(C) Statesville's retail stores have been consistently considered the best in the county, and consequently draw a lot of shoppers from other towns.

(D) Over the next few years, the Statesville area is likely to experience a severe recession, which could reduce consumer spending by as much as 40 percent.

(E) Administering the proposed tax will increase the cost of doing business for Internet retailers, who will then pass the increased cost on to consumers in the form of slight markups on the price of merchandise.
[Reveal] Spoiler: OA

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Senior Manager
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Re: Over the past few years, retailers in the town of [#permalink]

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25 Jun 2013, 03:52
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KUDOS
A- Because they do not need to rent or maintain physical showrooms, Internet retailers generally charge substantially lower prices for most items than do physical stores.
Since they charge substantially lower prices, the tax would also be correspondingly lower. Ergo, Stateville will not return to earning the revenues it did in the past.

B- The vast majority of Statesville's residents have at least one trusted friend or family member who lives in one of the smaller towns surrounding Statesville and whom they would trust to receive their packages.
So they could ship it to another address and collect it thus avoiding the excess tax.

C- Statesville's retail stores have been consistently considered the best in the county, and consequently draw a lot of shoppers from other towns.
Therefore, this floating population will remain in their home state and thus not need to pay Statesville.

D- Over the next few years, the Statesville area is likely to experience a severe recession, which could reduce consumer spending by as much as 40 percent.
Again Internet shopping will take a hit. Ergo, no taxes for SV.

E- Administering the proposed tax will increase the cost of doing business for Internet retailers, who will then pass the increased cost on to consumers in the form of slight markups on the price of merchandise.
This one's a winner. Since online stores will hike prices, they will pay taxes to Statesville. This may hit online retail ultimately, but that's another argument.
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petrifiedbutstanding

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Re: Over the past few years, retailers in the town of [#permalink]

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25 Jun 2013, 03:58
1
KUDOS
Official Explanation :

Identify the Question

We are asked to identify choices that “cast doubt on the mayor's conclusion”, so this is a weakening question. Note, however, that the goal of the question is to find the statement that does not weaken the argument.

Deconstruct the Argument

According to the argument, physical retailers in Statesville are losing business to Internet retailers, resulting in a concomitant loss of sales tax revenue for Statesville's government. To address the problem, the mayor of Statesville proposes that the town collect sales tax on all Internet purchases shipped to addresses within the town. If this measure is enacted, the mayor believes, Statesville will be able to bring its tax revenue back up to its previous levels.

State the Goal

The mayor believes that the new tax will restore the town's sales tax revenue to its original level. Therefore, any evidence that the proposed measure will not generate such additional revenue, or will generate less tax revenue than was collected before the advent of the Internet retailers, will weaken the mayor's argument.

Four of the given statements should weaken the mayor's argument; ultimately, we are looking for the one statement that does not.

Work from Wrong to Right

(A) If Internet retailers charge substantially lower prices for merchandise, and Statesville collects sales tax at the same rate used for purchases in physical stores, then Statesville will receive substantially less tax revenue from Internet purchases than it would if those purchases were made in the town's physical stores. This choice therefore weakens the mayor's argument.

(B) If this statement is true, then most residents of Statesville will be able to have Internet purchases shipped to an address outside the town, and will thus not have to pay the new tax. This statement also casts doubt on the mayor's argument.

(C) If shoppers from outside Statesville choose to purchase items on the Internet rather than in Statesville's retail stores, they will not pay the new tax, as those items will not be shipped within the town. (For purchases these customers still do choose to make at Statesville's retail stores, the argument is unaffected.) This choice serves as more evidence that the tax will not generate as much revenue as the mayor believes.

(D) If this statement is true, the total dollar amount of purchases made by Statesville's residents is likely to decrease sharply, resulting in a corresponding decrease in local tax revenue. Therefore, this choice also works against the mayor's argument.

(E) This choice does not give any evidence that local tax revenue will decrease. In fact, if Internet retailers compensate for the increase in their costs by raising the price of merchandise, Statesville's government will receive slightly more tax revenue from its residents' purchases of that merchandise. This choice thus works in favor of the mayor's argument, not against it.

The correct answer is E.
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Re: Over the past few years, retailers in the town of [#permalink]

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25 Jun 2013, 22:05
On any type of except question it may be helpful not to eliminate answers but to mark each answer with a word based on the question. Since this question is a weaken except question marking each answer on your scratch paper with "weaken," "not" or a "?" will be helpful to keep track of your thinking without having to go through the thinking process of whether an answer is correct or not each time.

One common way to weaken an argument is to introduce a new circumstance which, if true, means that the conclusion to the argument does not necessarily need to be true.

A) weaken. If internet retailers can charge lower prices then the tax money will also be reduced so if this is true, the conclusion does not have to be true.

B) weaken. If people can get the packages outside the city then they will not pay the tax and the city will not recoup its revenue.

C) weaken. If consumers go to the city stores, but still purchase on the internet, the city will not recoup the tax money because those people will not pay the city tax.

D) weaken. If the city is experiencing lowered retail sales, then the city will not recoup its revenue.

E) This answer does not weaken, in fact, we don't know what effect the increased prices will have - we don't know who will actuall have to pay the tax and who can avoid it so we don't know how this will affect the tax revenue.
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Re: Over the past few years, retailers in the town of [#permalink]

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14 Oct 2013, 09:15
petrifiedbutstanding wrote:
A- Because they do not need to rent or maintain physical showrooms, Internet retailers generally charge substantially lower prices for most items than do physical stores.
Since they charge substantially lower prices, the tax would also be correspondingly lower. Ergo, Stateville will not return to earning the revenues it did in the past.

B- The vast majority of Statesville's residents have at least one trusted friend or family member who lives in one of the smaller towns surrounding Statesville and whom they would trust to receive their packages.
So they could ship it to another address and collect it thus avoiding the excess tax.

C- Statesville's retail stores have been consistently considered the best in the county, and consequently draw a lot of shoppers from other towns.
Therefore, this floating population will remain in their home state and thus not need to pay Statesville.

D- Over the next few years, the Statesville area is likely to experience a severe recession, which could reduce consumer spending by as much as 40 percent.
Again Internet shopping will take a hit. Ergo, no taxes for SV.

E- Administering the proposed tax will increase the cost of doing business for Internet retailers, who will then pass the increased cost on to consumers in the form of slight markups on the price of merchandise.
This one's a winner. Since online stores will hike prices, they will pay taxes to Statesville. This may hit online retail ultimately, but that's another argument.

I am not from the United States, nor from Europe, how can I possibly know that you pay all your taxes regionally?

If you DO pay all your taxes regionally, it actually strengthens the mayor his proposal, because revenues will go up.

Or am I something missing here?
Re: Over the past few years, retailers in the town of   [#permalink] 14 Oct 2013, 09:15
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# Over the past few years, retailers in the town of

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