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The fee a certain plumber charges for service is based on

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The fee a certain plumber charges for service is based on [#permalink] New post 26 Nov 2013, 07:08
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The fee a certain plumber charges for service is based on a "cost-plus" pricing method. The plumber charges for all items used in the work, and adds a set percentage.

Which of the following statements, if true, would be the best basis for a criticism of "cost-plus" pricing as an economically advantageous method for customers of the plumber's service?

A. It is in the economic interest of the plumber to use expensive items, even if their use is not warranted by the circumstances.

B. The percentage added to the cost of an item has decreased over the past several years.

C. The plumber does not charge for labor costs, despite the extensive time requirements of some repair jobs.

D. Some past clients have criticized the quality of the plumber's work.

E. The "cost-plus" pricing method has been used by other plumbers in the region.
[Reveal] Spoiler: OA

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Re: The fee a certain plumber charges for service is based on [#permalink] New post 26 Nov 2013, 11:33
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Gnpth wrote:
The fee a certain plumber charges for service is based on a "cost-plus" pricing method. The plumber charges for all items used in the work, and adds a set percentage.

Which of the following statements, if true, would be the best basis for a criticism of "cost-plus" pricing as an economically advantageous method for customers of the plumber's service?

A. It is in the economic interest of the plumber to use expensive items, even if their use is not warranted by the circumstances.

B. The percentage added to the cost of an item has decreased over the past several years.

C. The plumber does not charge for labor costs, despite the extensive time requirements of some repair jobs.

D. Some past clients have criticized the quality of the plumber's work.

E. The "cost-plus" pricing method has been used by other plumbers in the region.

Dear Gnpth,
I'm happy to help. :-)

This prompt argument is unusually short. In that sense, I believe it may be a bit unrepresentative of what you will see on the GMAT.

We want a fact that will be bad for the customer of this plumber --- a reason it might be disadvantageous for a customer to choose a plumber who uses "cost-plus" pricing. Presumably, this could mean that the customer is overcharged --- bad for the customer, good for the plumber.

(A) It is in the economic interest of the plumber to use expensive items, even if their use is not warranted by the circumstances.
If the plumber uses expensive items, especially unnecessarily, this will inflate his fee, which is good for the plumber, not good for the customer. This is a promising answer to the question.

(B) The percentage added to the cost of an item has decreased over the past several years.
First of all, this would be vaguely beneficial to the customer, and it's not clear that this speaks to anything inherently fair or unfair about the "cost-plus" price scheme itself. This is not correct.

(C) The plumber does not charge for labor costs, despite the extensive time requirements of some repair jobs.
Well, this definitely would be to the disadvantage of the plumber and the advantage of the customer. This is not correct.

(D) Some past clients have criticized the quality of the plumber's work.
Hmmm. Tempting. This, though, is more a problem with the plumber himself, not really a problem with the "cost-plus" scheme of charging. In other words, if this plumber actually does low quality work, than that would be a detriment regardless of the pricing scheme he used. This is not correct.

(E) The "cost-plus" pricing method has been used by other plumbers in the region.
This is neutral. Perhaps it's a good sign, meaning that it's a fair practice, or perhaps it's a bad sign --- it's a slanted scheme that allows plumbers to exploit their customers. This may be relevant or may not be. We don't have enough information. This is not correct.

The only possible answer is (A), the OA.

Here's a blog about weakening the argument.
http://magoosh.com/gmat/2012/how-to-wea ... reasoning/

Does this make sense?

Mike :-)
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Re: The fee a certain plumber charges for service is based on [#permalink] New post 28 Nov 2013, 20:06
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Here is the official explanation from Kaplan.

Answer A - The actual question here is particularly complicated. We're asked for a criticism of the economic advantage of this method of pricing from the customer's point of view. In other words, how could the plumber cheat the customer? The method is that the plumber charges the customer a set price for the items used for the work and adds a set percentage. Thus, a project using high-priced items is economically advantageous for the plumber; a project using low-priced items is advantageous for the customer. Since the plumber chooses the tools (items) necessary for the job, it's advantageous to choose the highest-priced items, which will also increase the percentage received. Choice (A) gives the disadvantage of this plan for the customer—an unscrupulous plumber could choose the highest-costing items, whether they are necessary or not. Choice (A) is the correct answer.

Choice (B) is a 180; a decrease in the percentage would be advantageous for the customer, not the plumber. Choice (C) is out of scope—we already know the cost is based solely on the items used and a set percentage, not labor. Moreover, it would be to the customer's advantage not to have to pay for labor if a job takes a long time. Choice (D) is out of scope; the quality of work is not an issue, only the method of pricing is. Choice (E) is also out of scope; the number of plumbers using the method is not the issue, only its economic advantageousness. Moreover, if anything, this would strengthen the argument, since it implies that customers in the region are satisfied enough with the method not to avoid plumbers who use it.


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Re: The fee a certain plumber charges for service is based on [#permalink] New post 02 Aug 2014, 15:39
it is either that the question stem is worded wrongly or I do not understand what is meant. in the question posted 'Which of the following statements, if true, would be the best basis for a criticism of "cost-plus" pricing as an economically advantageous method for customers of the plumber's service?, option 'C' should be the correct answer. except it is reworded as '...economically disadvantageous method.... can someone please see reasons with me???
Re: The fee a certain plumber charges for service is based on   [#permalink] 02 Aug 2014, 15:39
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