The Calex Telecommunications Company is planning to

No offense indeed but I guess you misunderstood the argument. We are supposed to show how Calex will be able to make a profit.
Given fact: The target customers are farmers, who themselves struggle to get much money. Since the farmers themselves struggle to earn more, so how will they afford the cellular service.

A) There is a market for communication between locals and outsiders. If the farmer's can't afford service now, they MIGHT be able to afford service later when they get in contact with outside buyers using the cellular service provided by Calex, although it is not a guarantee. Also, outsiders may be calling in to the local farmers using the service.

B) This weakens the argument.

C) Smaller amount of subscribers compared to a fixed line company doesn't necessarily mean the investment will be profitable, so this choice does not weaken or strengthen the argument.

D) This weakens the argument. If service fees are based on costs, then the fees would be high due to the considerable investment costs.

E) The argument is about the coastal area of Caladia, not the capital.


My answer is A. Even though it doesn't guarantee Calex's investment will be profitable, it offers the evidence that shows a potential increase in subscribers.

Hi Marcab,

I agree with Nelz analysis.

The argument states that the reason farmers cannot afford the cellphone services is they don't make enough money. Option A states -Farmer doesn't make enough money due to unavailability of phones. It's kind of circular reasoning. If phones are available, farmers will use it as they will make profit. Thus, usage of phones will be there and the company can make profit.

Hii Vineet.
I am just putting up my and one of my friend's opinion upon the solution.

You just reversed the causality. They will buy the cellular service only if they have sufficient money. Let me throw some light.
The argument says that farmers struggle really hard to get enough money to survive. The telecom company thinks thinks that even though the situation in Caladia is not good for doing business but still Calex contends that making the service available to these farmers will be profitable.
A says-"CURRENTLY, Caladian coffee farmers are forced to sell their coffee to local buyers at whatever price those buyers choose to pay because the farmers are unable to remain in contact with outside buyers who generally offer higher prices".
It implies that currently they are forcefully selling their coffee to local buyers. Once they start selling their coffee outside theri region, the farmers will start getting much deserved money-profits will rise and thus thereby they will be enough money to afford cellular service.
I hope I made my point. Lets hear from others.

Farmers can't use the cellular service in order to contact outside buyers, because they don't have enough money to cope with the high costs of cellular services. Hence there is no room for circular reasoning.

Let's think from real world perspective.

Farmers in village make less money because of non-availability of phones. They come to know that a cellphone is launching cellphone and now they can make good money by using it. Don't you think that they will avail this by arranging money - through credit or by saving sooner or later.

An analogy- Suppose you don't have enough money to buy a laptop but you know you can improve your GMAT score greatly if you purchase one and a great score ensures good scholarship from top colleges. Don't you think you will buy one by arranging money or you will leave it thinking you don't have enough money.

Hi Vineet.
Trust me, but you have assumed a lot.
We have to be always within the scope of the stimulus. If it says that none of the coffee farmers make enough money to afford the monthly service fees that Calex would have to charge to make profit, then it really means that unless the farmers enough money, they will not use the cellular servive.
You don't have to go to that extent at which the farmers use credit cards or something.

There is also a scenario that 2-5 farmer can club money together and buy (use) cellular services. They then can have sufficient money to do so.

To your analogy- If I don't have a laptop and I also know without a laptop I won't be able to get a good score, then, to counter, I'll wait, save money and will get an Alienware.
There is another hole in the analogy. Given goal- to get scholarship from either of S/H/W. I might try to improve my profile, if I don't a very good score-since GMAT is just one of the several factors, the SWH considers.

Counter-
1) Even if they club together, they aren't able to sum enough money to get cellular service.
2) If they club together, then who is going to use the services. I guess one-is it really feasible to get a cellular service just for one farmer. I have not heard of any.
3) What if, they are not able to club; none of the farmers gel well with each other.

See likewise, there can be so many counters for assumptions. We always have to be in scope of the argument, otherwise holes will be left.

Well the point is - there are possibilities of availing the services. You can either consider the possibilities or counter the possibilities but the fact is it is not out of reach and remember that in Strengthen question, we need to provide a way which supports the conclusion not prove the conclusion. Option A does support the conclusion if not prove it.

None of the other choices are close to A. We need to chose the Option that is the best among the lot. In CR, there can be grey area. It can't be always black or white.

hi marcab, hi vineet,
good discussion!

I think the answer we should be looking for must cater two things:
1. What will attract farmers
2. How Calex will earn profits

As per option A, farmers earn profit on their crops with the service from Calex. In turn Calex will earn profit.

As per option B, no fixed line available but there is no guarantee or drive for the farmers to use the phone line service

As per option C, but what will drive the farmers to get a cellular service?

As per option D, this is calex strategy but how will it ensure profits? is there any potential sale that will happen?
I think this is second best answer.

As per option E, profit in one region does not guarantee a profit in another with a different population.

Hence I would go for Answer A.
Since it will drive the farmers to use the service. In turn Calex will make profits.

If either of C and D were mentioned in the passage and the other would have been then present as an option then would have chosen it...but as of now going by the options.....seems to be A

A. Currently, Caladian coffee farmers are forced to sell their coffee to local buyers at whatever price those buyers choose to pay because the farmers are unable to remain in contact with outside buyers who generally offer higher prices.

The point here is that farmers are trying to sell to outside buyers that pay a higher price. They, the farmers have an incentive to spend on this because in turn, they might make a lot more money. May be even enough to potentially offset the affordability element in the argument.

B. In the coastal areas of Caladia where Calex proposes to introduce cellular telephone service, there is currently no fixed-line telephone service because fixed-line companies do not believe that they could recoup their investment.

Personally, I consider this irrelevant. This focuses on fixed-line companies and even if we were to think “outside” the box, it’s telling me that there might be some uncovered issues that could be a major road block. Weakens the argument. Out.

C. A cellular telephone company can break even with a considerably smaller number of subscribers than a fixedline company can, even in areas such as the Caladian coast, where there is no difficult terrain to drive up the costs of installing fixed lines.

How do you know the relation between fixed-line and cellular line without going out of scope? In order for this to be true too, we actually have to make assumption that they are looking for telephone services which makes A even stronger.

D. Calex bases its monthly fees for cellular telephone service in a given region partly on the cost of installing the necessary equipment to provide the service there.

So essentially, this is going to be a very expensive service. Weakens.

E. Calex has for years made a profit on cellular telephone service in Caladia's capital city, which is not far from the coastal region.

Can be tempting, but out of scope.

My two cents (bold for what I considered important)

Conclusion here is that Calex will be profitable in area, even though no one can can afford the prices that must be charged to breakeven. Therefore, there must either be 1)Some outside factor to profitability (such as a government subsidiary) that would allow Calex to still make money AN/OR 2) the breakeven point is eventually me by the populace, wither by it going down or the pop. paying up.

A) New cell network would allow farmers to commicate with outside consumers and get more $ for their product. This adheres to situation 2 above (consumers make more money and pay up).
B) Fixed line companies is a random throw in by the GMAT to try to throw you off. You want to know why Calex, a cell company, will be profitable. Just because a fixed line isn't profitable you can't assume a cell won't be either.
C) Once again, fixed line is meant to throw you off. Additionally, even if we know that cell has a lower breakeven than fixed it was already established that no one in the area makes enough to subscribe anyway.
D) The cost of installing equipment will "require considerable investment" so the price charged will be high. This means that none of the coffee farmers could actually subscribe. Weakens conclusion.
E) Geographic proximity does not indicate that the profitability will be the same. Everyone in the city may be rich and subscribe to Calex.

Took me ~2:10 seconds to solve this one considering I ran through the answers twice and didn't like any of them. My mistake was not reading all answers fully, on my third go around I noticed the final part of A "ho generally offer higher prices" would provide information affecting the coffee makers wealth, which would affect Calex's profitability.

Hope this helps.

PA

I chose A

(A) With the tentation of gaining more, farmers will pay for the service, in return they will make more money and more farmers will join the trend which makes the company profitable.
(B) Out of scope. What fixed line companies believe about profitability in the region does not strengthen our conclusion, if anything, this weakens the argument.
(C) We are talking about making profit, breaking even is out of scope
(D) If Calex bases its fees on the investment it made. The fees will be huge since they are telling us , it made a considerable investment, which makes it impossible for the farmers to pay in the first place, which leads to no profit.
(E) Comparing the capital city with an isolated coastel area,is out of scope.