Solutions

Get detailed explanations to advanced GMAT questions.



Question

Paper&Print is a chain of British stores selling magazines, books, and stationery products. In Britain, magazines’ retail prices are set by publishers, and the retailer’s share of a magazine’s retail price is 25 percent. Since Paper&Print’s margin on books and stationery products is much higher, the chain’s management plans to devote more of its stores’ shelf space to books and stationery products and reduce the number of magazine titles that its stores carry.

Which of the following, if true, most strongly argues that the plan, if put into effect, will not increase Paper&Print’s profits?


 

Option A:

Recently magazine publishers, seeking to increase share in competitive sectors of the market, have been competitively cutting the retail prices of some of the largest circulation magazines.

Option B:

In market research surveys, few consumers identify Paper&Print as a book or stationery store but many recognize and value the broad range of magazines it carries.

Option C:

The publisher’s share of a magazine’s retail price is 50 percent, and the publisher also retains all of the magazine’s advertising revenue.

Option D:

Consumers who subscribe to a magazine generally pay less per issue than they would if they bought the magazine through a retail outlet such as Paper&Print.

Option E:

Some of Paper& Print’s locations are in small towns and represent the only retail outlet for books within the community

Difficulty Level

Easy

Solution

Option B is the correct answer.


Option Analysis

Question type: Weaken the argument.  

Summary of the argument: The plan is to increase the shelf space for books and stationery products because the profit margin for the company is higher on those products. We now need to find an answer choice that says that increasing shelf space does not increase the money that the company is making.  

A) This Option tells us that the money that the company making will go down. However, the reason why the money will go down is that the retail price of the magazines is being cut down and not because of an increase in shelf space.  

B) Correct Answer

C) Doesn’t relate increasing shelf price to decrease in the money earned.  

D) Irrelevant.  

E) So what? The margins could still be high in this case. Irrelevant.