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01 Apr 2021, 20:09
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Coffee shop owner: A large number of customers will pay at least the fair market value for a cup of coffee, even if there is no formal charge. Some will pay more than this out of appreciation of the trust that is placed in them. And our total number of customers is likely to increase. We could therefore improve our net cash flow by implementing an honor system in which customers pay what they wish for coffee by depositing money in a can.
Manager: We're likely to lose money on this plan. Many customers would cheat the system, paying a very small sum or nothing at all.
Which of the following, if true, would best support the owner’s plan, in light of the manager’s concern?
Owner P : customers will pay fair value for a cup of coffee under honor system and # of customers is likely to increase.
Owner C : Thus honor system will increase net cash
Manager C : customers will cheat and net cash will decrease.
How to support Owner?
Any evidence that people will not cheat will support.
Any evidence that insists net cash loss by cheat < net cash increase by system will help.
(A) The new system if implemented, would increase the number of customers.
-> Although number of customers might increase, if most of them cheat then the net cash flow will not increase.
(B) By roasting its own coffee, the shop has managed to reduce the difficulties and cost of maintaining an inventory of freshly roasted coffee.
-> Irrelevant. inventory was not a issue in this argument.
(C) Many customers stay in the cafe for long stretches of time.
-> Irrelevant. It is hard to find linkage between time and cheating
(D) The shop makes a substantial profit from pastries and other food bought by the coffee drinkers.
-> Correct, This option implies that even though some people might cheat, the coffee shop still can make substantial profit with other matters. Thus making net cash loss by cheating < net chase increase by system.
(E) No other coffee shop in the area has such a system.
-> Irrelevant. other coffee shop gives us no further infromation.
Manager: We're likely to lose money on this plan. Many customers would cheat the system, paying a very small sum or nothing at all.
Which of the following, if true, would best support the owner’s plan, in light of the manager’s concern?
Owner P : customers will pay fair value for a cup of coffee under honor system and # of customers is likely to increase.
Owner C : Thus honor system will increase net cash
Manager C : customers will cheat and net cash will decrease.
How to support Owner?
Any evidence that people will not cheat will support.
Any evidence that insists net cash loss by cheat < net cash increase by system will help.
(A) The new system if implemented, would increase the number of customers.
-> Although number of customers might increase, if most of them cheat then the net cash flow will not increase.
(B) By roasting its own coffee, the shop has managed to reduce the difficulties and cost of maintaining an inventory of freshly roasted coffee.
-> Irrelevant. inventory was not a issue in this argument.
(C) Many customers stay in the cafe for long stretches of time.
-> Irrelevant. It is hard to find linkage between time and cheating
(D) The shop makes a substantial profit from pastries and other food bought by the coffee drinkers.
-> Correct, This option implies that even though some people might cheat, the coffee shop still can make substantial profit with other matters. Thus making net cash loss by cheating < net chase increase by system.
(E) No other coffee shop in the area has such a system.
-> Irrelevant. other coffee shop gives us no further infromation.
18 Jul 2021, 12:46
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Hello GMATNinja
Hope you are doing well!
The doubt still persists. Let me explain how I think about this argument.
Owner - Implementing honour system will increase the net cash flow because:
People generally tend to pay more because of the trust placed in them AND
Our customer base is likely to increase.
In the explanation provided you, it is stated that honour system is what will increase the customers.
This is not inferrable from the original question stem. What we can infer is the other way round.
An increase in customers is what will make implementing the honour based improve the cashflow.
Honour based system is not what will make the customer base go up and thus the net revenue.
Event A: Inc. in customer base.
Event B: implementation of honour system.
Event C: Inc in revenue.
My reasoning: Because A, let do B to get C.
Your reasoning: Because B causes A, let us do B to get C.
My question - how do we infer "because B causes A"? I hope my point comes through. Such a great OG question.
Regards.
Hope you are doing well!
The doubt still persists. Let me explain how I think about this argument.
Owner - Implementing honour system will increase the net cash flow because:
People generally tend to pay more because of the trust placed in them AND
Our customer base is likely to increase.
In the explanation provided you, it is stated that honour system is what will increase the customers.
This is not inferrable from the original question stem. What we can infer is the other way round.
An increase in customers is what will make implementing the honour based improve the cashflow.
Honour based system is not what will make the customer base go up and thus the net revenue.
Event A: Inc. in customer base.
Event B: implementation of honour system.
Event C: Inc in revenue.
My reasoning: Because A, let do B to get C.
Your reasoning: Because B causes A, let us do B to get C.
My question - how do we infer "because B causes A"? I hope my point comes through. Such a great OG question.
Regards.
GMATNinja
09 Aug 2021, 14:45
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abhola
The problem with your reasoning is that the increase in the total number of customers is no longer connected to the conclusion. In other words, if you assume that the number of customers will increase regardless, then we don’t necessarily know that “we could therefore improve our net cash flow by implementing an honor system.”
If it’s true that the number of customers will increase no matter what the price of coffee is, then the shop will increase its net cashflow. BUT the increase in net cash flow would not be “by implementing an honor system.”
So, for the reasoning of the passage to make sense, in addition to the fact that the structure of the passage lends itself to this reading, we have to acknowledge that the increase in customers is the result of the honor system.
I hope that helps!
. Going out to get some coffee and yummy baked Nutella Tart....you want some 
. 
