The fares charged by taxicabs in Centerville are set by the city council. Last year the council approved an increase...
GMAT Critical Reasoning : (CR) Questions
The fares charged by taxicabs in Centerville are set by the city council. Last year the council approved an increase in fares sufficient to offset rising vehicle maintenance costs paid by taxi drivers. In the year since then, no new taxi licenses were issued, taxi ridership has been up, but the average net income of taxi drivers, excluding tips, has been down.
The information given, if accurate, most strongly supports which of the following?
Passage Visualization
| Passage Statement | Visualization and Linkage |
|---|---|
| The fares charged by taxicabs in Centerville are set by the city council. Last year the council approved an increase in fares sufficient to offset rising vehicle maintenance costs paid by taxi drivers. | Establishes: Fare increase was designed to help drivers Example: If maintenance costs rose by $50/day per driver, fares increased to generate an additional $50/day revenue Expected outcome: Driver net income should remain stable |
| In the year since then, no new taxi licenses were issued | Establishes: Supply of taxis remained constant Example: If there were 100 taxi licenses before, there are still exactly 100 licenses Key insight: No dilution of revenue among more drivers |
| taxi ridership has been up | Establishes: Demand for taxi services increased Example: If ridership was 1,000 rides/day before, it might now be 1,200 rides/day Expected outcome: More rides + higher fares = significantly more revenue per driver |
| but the average net income of taxi drivers, excluding tips, has been down | Establishes: Actual driver income decreased despite favorable conditions Example: If drivers previously netted $200/day, they might now net only $150/day Contradiction: Income fell when it should have risen substantially |
| Overall Implication | PARADOX REVEALED: Despite perfect storm of positive factors (higher fares + more riders + same number of drivers), net income actually decreased. This suggests additional costs beyond maintenance must have emerged that were larger than the combined benefit of fare increases and ridership growth. |
Valid Inferences
Inference: Additional costs beyond vehicle maintenance must have significantly increased for taxi drivers during this period.
Supporting Logic: Since fare increases were designed to offset maintenance costs and ridership increased while the number of taxi licenses remained constant, drivers should have experienced higher net income from both more revenue per ride and more total rides. However, since net income actually decreased, there must be new or increased costs beyond the maintenance costs that were already accounted for in the fare increase.
Clarification Note: The passage supports that unaccounted costs emerged, but does not specify what these costs might be (fuel, insurance, licensing fees, etc.). We cannot determine the specific nature of these additional costs from the given information.
This choice states that taxi drivers' expenses have risen in at least one category other than vehicle maintenance. Given that fare increases were specifically designed to offset maintenance costs, and despite having more riders (increased revenue) with the same number of drivers, net income still decreased, there must be additional expenses beyond maintenance that weren't accounted for in the fare increase. This is the only logical explanation for the paradox presented. This choice is CORRECT.
This choice suggests that taxi drivers worked longer hours than the year before. However, the passage tells us ridership was up, which could mean drivers earned more per hour rather than working longer hours. We have no information about hours worked, and this doesn't explain why net income decreased despite favorable conditions. This choice is INCORRECT.
This choice focuses on tips being less than before. However, the passage specifically states that the net income figures exclude tips, so changes in tip amounts wouldn't affect the net income calculation mentioned in the passage. This choice is irrelevant to explaining the decrease in net income. This choice is INCORRECT.
This choice discusses ridership on Centerville's public transportation system growing for several years. The passage only mentions taxi ridership being up in the past year and provides no information about public transportation trends over multiple years. This choice introduces information not supported by the passage. This choice is INCORRECT.
This choice suggests a growing percentage of citizens rely on taxicabs for all their local transportation needs. While this might explain increased ridership, the passage doesn't provide information about citizens' transportation dependency patterns or what percentage rely entirely on taxis. This goes beyond what we can infer from the given information. This choice is INCORRECT.