GMAT Critical Reasoning
A discount retailer of basic household necessities employs thousands of people and pays most of them at the minimum wage rate. Yet following a federally mandated increase of the minimum wage rate that increasedthe retailer's operating costs considerably, the retailer's profits increased markedly.
Which of the following, if true, most helps to resolve the apparent paradox?
- A Over half of the retailer's operating costs consist of payroll expenditures; yet only a small percentage of those expenditures go to pay management salaries.
- B The retailer's customer base is made up primarily of people who earn, or who depend on the earnings of others who earn, the minimum wage.
- C The retailer's operating costs, other than wages, increased substantially after the increase in the minimum wage rate went into effect.
- D When the increase in the minimum wage rate went into effect, the retailer also raised the age rate for employees who had been earning just above minimum wage.
- E The majority of the retailer's employees work as cashiers, and most cashiers are paid the minimum wage.
Correct Answer: B