Q4 - When deciding where to locate

[tzyc]

I was not sure between (A) and (B)...could anyone explain how (B) would help to explain the discrepancy?
Thank you

[ohthatpatrick]

Here's our paradox:

i. All the factors businesses consider when (re)locating are of roughly equal importance
YET
ii. Some of them, if missing, are normally dealbreakers (such as lack of proximity to markets or raw materials) while another, (lack of a low business-tax rate) is normally not a dealbreaker.

I would probably frame my thinking around this question:
"Why is lack of proximity to markets/raw materials a dealbreaker"
or
"Why is lack of a low business-tax rate NOT a dealbreaker"?

(B) answers the latter question by saying that a high business-tax rate, while displeasing on its own to businesses, tends to promote TWO of the other factors businesses are looking for: educated work force and high level of services. So that's why a high business-tax rate is not a dealbreaker to a business looking for a good location. Even though the business would prefer a low business-tax rate, the business might recognize that the high tax rate brings with it two things the business also cares about. (And since all these factors are of roughly equal importance, getting two things you want beats missing out on one thing you want).

=== other answers ===

(A) We're not concerned with cities' tax revenue. We're concerned with why BUSINESSES are unwilling to put up with some negative factors but willing to put with others. This doesn't address either side of that.

(C) The information in the stimulus allows for the fact that a high tax is SOMETIMES a dealbreaker, so this is basically telling us what we already know. We're trying to explain why businesses DON'T usually leave a municipality with high taxes, so this is of no help.

(D) This is about the work force; we're concerned about the businesses trying to decide on their location. Also, this doesn't address any of the factors involved in the paradox (proximity to markets/raw materials or business-tax rate).

(E) This is close to being a usable answer. If it said, "business are OFTEN SUCCESSFUL at persuading a municipality to lower its business-tax rate", then we could say "oh, okay. Businesses don't consider a high business-tax rate a dealbreaker because they believe that they'll be able to convince the city to lower it." But, as is, this answer is too weakly worded to have that effect.

Hope this helps.