In the year following an eight-cent increase in the federal tax on a pack of cigarettes, sales of cigarettes fell...
GMAT Critical Reasoning : (CR) Questions
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 the following assumptions?
Passage Analysis:
| Text from Passage | Analysis |
| In the year following an eight-cent increase in the federal tax on a pack of cigarettes, sales of cigarettes fell ten percent. |
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| In contrast, in the year prior to the tax increase, sales had fallen one percent. |
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| The volume of cigarette sales is therefore strongly related to the after-tax price of a pack of cigarettes. |
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Argument Flow:
The author presents two pieces of sales data as evidence - a 10% drop after an 8-cent tax increase versus only a 1% drop the year before. This comparison is used to support the conclusion that sales volume is strongly related to after-tax price.
Main Conclusion:
The volume of cigarette sales is strongly related to the after-tax price of a pack of cigarettes.
Logical Structure:
The argument uses a before-and-after comparison as evidence. It compares the small 1% sales drop before the tax increase with the much larger 10% drop after the tax increase, then concludes this difference proves a strong relationship between price and sales volume.
Prethinking:
Question type:
Assumption - We need to find what the author must believe to be true for their conclusion to hold. The author concludes that cigarette sales volume is strongly related to after-tax price based on comparing sales drops before vs. after a tax increase.
Precision of Claims
The argument makes specific quantitative claims (8-cent tax increase, 10% sales drop after vs. 1% drop before) and draws a causal relationship conclusion about price sensitivity.
Strategy
For assumption questions, we identify ways the conclusion could be falsified while respecting the given facts. The author sees a much bigger sales drop (10%) after the tax increase compared to before (1%) and concludes this shows price sensitivity. We need to think about what could make this reasoning fall apart - what alternative explanations could account for the sales difference that would break the price-volume relationship?
This choice states that during the year following the tax increase, the pretax price didn't increase by as much as it had during the previous year. However, this isn't necessary for the argument. The author's conclusion about the relationship between after-tax price and sales volume doesn't depend on comparing pretax price increases between different years. Even if the pretax price increased more in the year following the tax increase than in the previous year, the argument could still hold as long as the after-tax price actually went up.
This suggests the 1% sales drop in the prior year was due to a smaller tax increase. This isn't required for the argument to work. The author is using the prior year's 1% drop as a baseline for comparison, regardless of what caused it. The argument would still be valid even if the 1% drop was caused by factors other than taxes, such as health campaigns or economic conditions.
This states that pretax prices gradually decreased throughout both years. This is too specific and not necessary. The argument doesn't require any particular pattern of pretax price changes - it only requires that the after-tax price comparison be meaningful. Gradual decreases aren't essential for the conclusion.
This is the correct assumption. If the pretax price had dropped by 8 or more cents in the year following the tax increase, then despite the 8-cent tax increase, the after-tax price would have stayed the same or even decreased. This would completely undermine the author's conclusion that higher after-tax prices caused the sales drop. For the argument to work, we must assume this didn't happen - the pretax price couldn't have dropped enough to offset the tax increase.
This claims that as after-tax price rises, pretax price also rises. This actually contradicts what we need for the argument. If anything, we'd want pretax prices to remain stable when taxes increase, so that the tax increase actually results in higher after-tax prices. This choice describes a scenario that would make it harder to isolate the effect of the tax increase.