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New OG 2016:Coffee shop owner: A large number of customers will pay at

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New OG 2016:Coffee shop owner: A large number of customers will pay at [#permalink]

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New post 03 Jul 2015, 10:55
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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?

(A) The new system if implemented, would increase the number of customers.

(B) By roasting its own coffee, the shop has managed to reduce the difficulties and cost of maintaining an
inventory of freshly roasted coffee.

(C) Many customers stay in the cafe for long stretches of time.

(D) The shop makes a substantial profit from pastries and other food bought by the coffee drinkers.

(E) No other coffee shop in the area has such a system.
[Reveal] Spoiler: OA

Last edited by hazelnut on 20 Jul 2017, 22:09, edited 1 time in total.
Formatted the question.

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Re: New OG 2016:Coffee shop owner: A large number of customers will pay at [#permalink]

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New post 03 Jul 2015, 11:43
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Everytime i read an official question, my respect for the test makers go up several folds.
The issue at hand is: no charge for coffee. Customers can drink coffee and pay as much as they wish. Owner asserts people will be fair and pay at least the amount rightly deserved. But manager says people may end up taking undue advantage.
Now, what if coffee is free but the coffee shop makes substantial profit from the delicatessens? It is also said #of customers will go up so the profit from pastries will also go up and so revenue will go up.
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Re: New OG 2016:Coffee shop owner: A large number of customers will pay at [#permalink]

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New post 04 Jul 2015, 07:13
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Owners Premise - Coffee drinkers would pay the fair value for the coffee and the number of customers is likely to increase
Conclusion - Netcashflow will increase.
Manager Premise - Coffee drinkers will cheat and pay a small amount for the coffee.

We have to strengthen the Conclusion of the owners argument - that is cashflow is going to increase because of the plan he proposes.
It is possible that the owners plan works - that is coffee drinkers play a fair value for the coffee or even more and in that case the cashflow would increase.
It is also possible that coffee drinkers cheat as the manager suggests but even if that happens it is possible that the net cashflow of the coffee shop increases as a result of this plan in any possible way. If any answer choice can show this then that strengthens the owners conclusion.

(A) The new system. it implemented, would increase the number of customers.
-> Even if the number of customers increase it is possible that the customers cheat and hence netcashflow could go down.

(B) By roasting its own coffee, the shop has managed ho reduce the difficulties and cost of maintaining an inventory of freshly roasted coffee.
-> This choice does not affect the conclusion in any way.

(C) Many customers stay in the cafe for long stretches of time.
-> This choice does not affect the conclusion in any way. Even if they stay long that in no way suggests that cashflow would go up. If more people stay in coffee shop that actually pay less than market place the cashflow could even decrease further.

(D) The shop makes a substantial profit from pastries and other food bought by the coffee drinkers.
-> Hmm , this answer choice gives a reason as to why the cashflow could actually go up. If coffee drinkers eat other food from the coffee shop then that can actually increase the cashflow of the coffee shop.

(E) No other coffee shop in the area has such a system.
-> This choice does not affect the conclusion in any way.
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Re: New OG 2016:Coffee shop owner: A large number of customers will pay at [#permalink]

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New post 18 Jul 2015, 09:11
this indeed is a lovely question, i had think twice before choosing D; simple yet interesting.

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Re: New OG 2016:Coffee shop owner: A large number of customers will pay at [#permalink]

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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 oi 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.

Argument Analysis :
Owner : No price tag, let customer pay what they want. Large number of Customer will pay fair price. Total customer base will increase, improving net cash flow.
Manager : Customer will cheat, leading to losses.

What can best support Owner's argument, if manager is true.
Pre thinking :
1. If Customer base increases hugely and Proportion of cheater is negligible.
2. If Customer buy something else along with coffee, and the price of add on stuff compensate the free tag of coffee.

POE.

(A) The new system. it implemented, would increase the number oi customers.
ISWAT - (Most attractive) - Agreed that it will increase customer, but what if high proportion of customers don't pay. So store will end in losses - Incorrect.

(B) By roasting its own coflee, the shop has managed ho reduce the difficulties and cost of maintaining an
inventory of freshly roasted coffee.
Out of Scope - This knowledge of roasting expense and it's impact on Revenue has not been shared with us. also, it no where connects to the plan shared in argument. So out of scope - Incorrect

(C) Many customers stay in the cafe for long stretches of time.
out of scope - Correlation between period of stay and Income from stay of customer is not discussed in argument. Hence out of scope - Incorrect.

(D) The shop makes a substantial profit from pastries and other food bought by the coffee drinkers.
Correct - If customer buys Sides along with coffee and those side dishes makes nice profit, then it will compensate price tag free coffee. Also due to shop's plan, Customer intake will increase, and hence sales of sides will increase, Increasing profit.

(E) No other coffee shop in the area has such a system.
out of scope - Other shop may not have it, but this does not prove that shop will make profit.

option D is correct

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Re: New OG 2016:Coffee shop owner: A large number of customers will pay at [#permalink]

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New post 21 Jul 2015, 05:31
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?
The manager's concern is that they will lose money because the customers will cheat. The correct choice addresses this issue. Look for an answer choice that shows that the customers will continue to pay somehow and the cafe won't lose money.

(A) The new system. if implemented, would increase the number of customers.
An increase in customers could mean an increase in customers who don't pay.
(B) By roasting its own coffee, the shop has managed to reduce the difficulties and cost of maintaining an
inventory of freshly roasted coffee.
The difficulties and cost of maintaining freshly roasted coffee are not relevant.
(C) Many customers stay in the cafe for long stretches of time.
The time that customers stay in the cafe is not relevant. They can stay but not spend.
(D) The shop makes a substantial profit from pastries and other food bought by the coffee drinkers.
This shows that even if the customers cheat on the coffee cost the cafe receives profit from pastries and other food.
(E) No other coffee shop in the area has such a system.
Whether or not it's a unique system is not relevant.
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Re: New OG 2016:Coffee shop owner: A large number of customers will pay at [#permalink]

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New post 16 Sep 2016, 16:22
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Re: New OG 2016:Coffee shop owner: A large number of customers will pay at [#permalink]

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New post 04 Oct 2016, 02:32
D is the correct choice.

As main source of income for shop is not coffee. If honor system is implement on coffee still it is not going to suffer loss.

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Re: New OG 2016:Coffee shop owner: A large number of customers will pay at [#permalink]

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New post 13 Sep 2017, 05:44
Coffee shop owner says that the customers are likely to increase due to fair price. A customer can pay as much for coffee as he want.
Manager : Customers can take undue advantage of this.

What if the profit of the coffee shop comes significantly from the other food items like the cakes, deserts and other delicacies.
Option D holds a strong support for the owner and hence the answer.

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Re: New OG 2016:Coffee shop owner: A large number of customers will pay at   [#permalink] 13 Sep 2017, 05:44
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