When unscrupulous people shoplift, a vicious cycle results. Retailers

Question

When unscrupulous people shoplift, a vicious cycle results. Retailers must raise their prices in order to make up for the lost sales, and the higher prices encourage more people to shoplift. This vicious cycle hurts honest consumers worst of all, because they to pay higher prices

The vicious cycle described above could not happen unless which of the following is true?

A. Shoplifters usually steal only items that they need but cannot afford.

B. Retailers do not take shoplifting losses into account when they initially set their prices.

C. The best way for retailers to address shoplifting is by punishing shoplifters to the extent of the law.

D. Some people would shoplift no matter how low retailers set their prices.

E. It costs retailers more to pay security guards to prevent shoplifting than just to absorb the cost of occasional losses due to theft.

Source:  McGraw-Hill's

helloksin · Answer

How is the answer B?
Question stem says: vicious cycle described above  could not  happen  unless  => vicious cycle will happen if:
Retailers do not take shoplifting losses into account when they initially set their prices.?

while the passage says: Retailers must raise their prices in order to make up for  the  lost sales (isn't this lost sales from the shop-lifting?) so vicious cycle happens because  do  take shoplifting losses into account when they initially set their prices. (or does initially mean before the cycle starts?)

And why is A wrong?

RMD007 · Answer

Expert, I do not understand the OA. Can you please explain...

HKD1710 · Answer

Hi  RMD007  &  helloksin

Though not expert but i have tried to explain here:

Suppose you have a retail store. Someone dishonest came and stole few different items, items that had the higher price tag than other items.

You in order to make up for the lost sales RAISE THE PRICE. This only encouraged those dishonest shoppers to steal more.

You again RAISE PRICE. This is vivious cycle.

Question stem asks you what is necessary for this vicious cycle to occur.  This is a defender assumption question.

Now tell me when do you think you would not raise the price? i think if you already had the prices higher because you are well aware of shoplifting.

Analogy  - Think about the advertisement costs that are considered before bringing a product in the market.

Cost of a product is calculated considering the following:
raw material cost
labor cost
advertisement cost
maintenance cost
transportation cost
damage cost

SIMILARLY - retailer could keep the price higher already if they added the cost that they have incur because of SHOPLIFTING.

CHOICE B exactly tells you the same.

Now A is definitely wrong. It talks about the intention of of shoplifters. We are caring about the prices here not the intention.

RMD007 · Answer

Thanks for the reply. I guess the question stem stumped me..

abhishekdadarwal2009 · Answer

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McGraw Hill GMAT

When unscrupulous people shoplift, a vicious cycle results. Retailers must raise their prices in order to make up for the lost sales, and the higher prices encourage more people to shoplift. This vicious cycle hurts honest consumers worst of all, because they to pay higher prices

The vicious cycle described above could not happen unless which of the following is true?

A. Shoplifters usually steal only items that they need but cannot afford.
 B. Retailers do not take shoplifting losses into account when they initially set their prices. 
C. The best way for retailers to address shoplifting is by punishing shoplifters to the extent of the law.
D. Some people would shoplift no matter how low retailers set their prices.
E. It costs retailers more to pay security guards to prevent shoplifting than just to absorb the cost of occasional losses due to theft.

THe question asks about the cycle and not the prices,and option B address the reason of the cycle.If the shopkeepers consider the losses before setting the prices then they would keep the prices little higher initially and that will not lead to the 'vicious cycle'

eddy8700 · Answer

B. Retailers do not take shoplifting losses into account when they initially set their prices.

If retailers initially consider losses into account then they can set up prices higher initially rather than raising the prices later on which will create this viscous circle

Sajjad1994 · Answer

Official Explanation

If statement B is not true, then retailers would not raise their prices after shoplifting occurred, and the vicious cycle as described could not happen.

ANSWER: B

keyuwang · Answer

The fact that retailers simply take shoplifting into account doesn't mean that they can accurately predict the number or the extent of shoplifting that will happen to make their price increases reasonable. What if the neighborhood became poorer and the initial price raise is no longer enough to cover the increasing number of shoplifting? Then the vicious cycle would begin again.

When unscrupulous people shoplift, a vicious cycle results. Retailers

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When unscrupulous people shoplift, a vicious cycle results. Retailers

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