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QOTD: Studies in restaurants show that the tips left by customers

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Verbal Question of The Day: Day 263: Critical Reasoning


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Studies in restaurants show that the tips left by customers who pay their bill in cash tend to be larger when the bill is presented on a tray that bears a credit-card logo. Consumer psychologists hypothesize that simply seeing a credit-card logo makes many credit-card holders willing to spend more because it reminds them that their spending power exceeds the cash they have immediately available.

Which of the following, if true, most strongly supports the psychologists’ interpretation of the studies?

A. The effect noted in the studies is not limited to patrons who have credit cards.

B. Patrons who are under financial pressure from their credit-card obligations tend to tip less when presented with a restaurant bill on a tray with credit-card logo than when the tray has no logo.

C. In virtually all of the cases in the studies, the patrons who paid bills in cash did not possess credit cards.

D. In general, restaurant patrons who pay their bills in cash leave larger tips than do those who pay by credit card.

E. The percentage of restaurant bills paid with a given brand of credit card increases when that credit card’s logo is displayed on the tray with which the bill is prepared.

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QOTD: Studies in restaurants show that the tips left by customers  [#permalink]

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New post 10 Apr 2018, 14:18
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The passage itself is pretty straightforward:

  • We have the results of the studies: "the tips left by customers who pay their bill in cash tend to be larger when the bill is presented on a tray that bears a credit-card logo." - notice the use of the word "tend". The psychologists are not suggesting that seeing a credit card (CC) logo on the tray will ALWAYS cause an increase in tip amount. In general, seeing a CC logo results in higher tip amounts.
  • And we have an interpretation of those results: "simply seeing a credit-card logo makes many credit-card holders willing to spend more because it reminds them that their spending power exceeds the cash they have immediately available." - notice that this hypothesis only mentions "credit-card holders"

What the heck does that mean? Well, if you have $100 cash in your pocket and don't have any credit cards, then your "spending power" is limited to that cash amount. If you walk into an electronics store and want to buy a fancy television for $1,000, you'll be out of luck.

But what if, in addition to the $100 cash, you have a CC with a $5,000 spending limit? Now your spending power exceeds the amount of cash in your pocket. Sure, you'll have to pay off that credit card in the future, but right now you can walk into that electronics store and buy FIVE of those fancy televisions! The credit card does not actually give you any money, but it certainly increases your present spending power.

So now imagine you are in a restaurant. The bill is $50, and you have $100 cash in your pocket. You decide to leave a 10% tip ($5). But then you notice the credit card logo on the bill tray. This reminds you of the shiny American Express CC in your pocket, and that card has a $5,000 credit limit. You are reminded that your spending power exceeds the $100 cash that you have. So paying a $50 restaurant bill is not going to take away HALF of your spending power. Instead, it will only take away a small portion of your current spending power.

Reminded that you spending power is not limited to the cash, you might decide to leave an even larger tip (maybe $7-10 instead of $5).

Now that we understand the psychologists’ interpretation of the studies, we need something that supports that interpretation:

Quote:
A. The effect noted in the studies is not limited to patrons who have credit cards.

The hypothesis is that the CC logo reminds people that they have a credit card and thus that they have greater spending power. If (A) is true, then the logos cause higher tips even among people who do NOT have credit cards. In that case, the increase can't be explained by the psychologists' hypothesis. (A) weakens the argument, so eliminate this one.

Quote:
B. Patrons who are under financial pressure from their credit-card obligations tend to tip less when presented with a restaurant bill on a tray with credit-card logo than when the tray has no logo.

According to the psychologists, customers tip more when they are reminded that their spending power exceeds the cash they currently have available. If this is true, then we would expect customers to tip LESS when they are reminded that their spending power is LESS than the cash they currently have available.

Huh? Well, think about a man who is in debt. He might have $100 in his pocket, but he owes his friend $500. He might have been ready to give a $5 tip, but as soon as he remembers that he owes money, he decides to give $3-4 instead.

Although choice (B) presents a scenario that is the opposite of the one presented in the passage, both scenarios support the same theory, which is that being reminded of your spending power can impact how much you tip. Generally, this causes people to tip more because they are reminded that their spending power exceeds the cash they have. However, for people in credit card debt, seeing the logo is a reminder that their spending power is actually lower.

So if choice (B) is true, it would support the psychologists' hypothesis. Keep this one.

Quote:
C. In virtually all of the cases in the studies, the patrons who paid bills in cash did not possess credit cards.

As with choice (A), this weakens the argument. The whole idea is that the CC logo reminds you that you have a credit card and, thus, that your spending power is not limited to the cash in your pocket. (C) tells us that the logos caused higher tips even though the patrons did NOT have CC's. This contradicts the hypothesis, so eliminate (C).

Quote:
D. In general, restaurant patrons who pay their bills in cash leave larger tips than do those who pay by credit card.

If anything, this might weaken the hypothesis. People who pay with a CC are obviously aware that they have a credit card. If, as the psychologists suggest, having a CC supposedly makes you aware of your expanded spending power, then why don't the people paying with CC's leave larger tips?

The hypothesis can certainly still work even if (D) is true. Maybe cash patrons tend to tip more for some reason that is unrelated to the study. Regardless, if those people tend to tip even more when they see the CC logo because they are reminded of their expanded spending power, then the psychologists' interpretation would be accurate.

At best, (D) has no impact, but it certainly doesn't strengthen the argument. Eliminate (D).

Quote:
E. The percentage of restaurant bills paid with given brand of credit card increases when that credit card’s logo is displayed on the tray with which the bill is prepared.

This evidence suggests that the logos can be effective as advertising tools. If you see the AMEX logo, you might decide to use your AMEX card instead of cash or instead of your Visa card. But how does that impact your tip amount? The hypothesis is not concerned with whether people actually use CC's. Rather, it is concerned with the cause of the increased tip amounts. (E) is irrelevant.

(B) is the best answer.
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Re: QOTD: Studies in restaurants show that the tips left by customers  [#permalink]

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New post 10 Apr 2018, 20:05
souvik101990 wrote:

Verbal Question of The Day: Day 263: Critical Reasoning


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Studies in restaurants show that the tips left by customers who pay their bill in cash tend to be larger when the bill is presented on a tray that bears a credit-card logo. Consumer psychologists hypothesize that simply seeing a credit-card logo makes many credit-card holders willing to spend more because it reminds them that their spending power exceeds the cash they have immediately available.

Which of the following, if true, most strongly supports the psychologists’ interpretation of the studies?

A. The effect noted in the studies is not limited to patrons who have credit cards.

B. Patrons who are under financial pressure from their credit-card obligations tend to tip less when presented with a restaurant bill on a tray with credit-card logo than when the tray has no logo.

C. In virtually all of the cases in the studies, the patrons who paid bills in cash did not possess credit cards.

D. In general, restaurant patrons who pay their bills in cash leave larger tips than do those who pay by credit card.

E. The percentage of restaurant bills paid with a given brand of credit card increases when that credit card’s logo is displayed on the tray with which the bill is prepared.

Every question of the day will be followed by an expert reply by GMATNinja in 12-15 hours. Stay tuned! Post your answers and explanations to earn kudos.


This is an interesting question where we need to look at opposite of what was stated in the argument to support the argument. For example if the patrons feel their spending power is higher than the amount they currently have just by looking at the credit card logo, the opposite of that also should also be true. For someone who has issues with their bank or credit card company, they feel discouraged to pay More tip as the logo reminds them of their bad issues. Hence in my opinion B could be the right answer.

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Re: QOTD: Studies in restaurants show that the tips left by customers  [#permalink]

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New post 12 Apr 2018, 07:54
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B it is. My take :

Type of question - Strengthen type

Deconstructing the argument -

Conclusion:
Consumer psychologist hypothesizes that simply seeing a credit-card logo makes many credit-card holders willing to spend more because it reminds them that their spending power exceeds the cash they have immediately available.

Premise:
Studies in restaurants show that the tips left by customers who pay their bill in cash tend to be larger when the bill is presented on a tray that bears a credit-card logo.

Pre-think:
We need to strengthen the link between spending power that exceeds the cash they have and willingness to spend more when they see a credit card logo. What if people are less willing to spend when they have credit card obligations.
In Cause - Effect reasoning ; if you can prove No Cause leads to No effect you strengthen the argument at hand. Use the same logic here.

POE:

a) Irrelevant
b) In line with our pre-thinking
c) Irrelevant
d) Cash payment not important to us - Irrelevant
e) Does not address the link between excess spending power and willingness to spend more - out

Only option B survives - Hence the answer :)
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Re: QOTD: Studies in restaurants show that the tips left by customers  [#permalink]

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Re: QOTD: Studies in restaurants show that the tips left by customers  [#permalink]

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New post 14 Apr 2018, 02:19
Studies in restaurants show that the tips left by customers who pay their bill in cash tend to be larger when the bill is presented on a tray that bears a credit-card logo. Consumer psychologists hypothesize that simply seeing a credit-card logo makes many credit-card holders willing to spend more because it reminds them that their spending power exceeds the cash they have immediately available.

This is a strengthen the argument question.
Like weaken, strengthen questions also require us to isolate the conclusion. As we will be looking for the answer that makes our belief stronger on the premise-conclusion relationship such as analogies, survey, reports, statistical data etc.

Also, protect the missing information
a) by keeping any option that fills the gap
b) by eliminating the answer that attacks the missing information

Causality and Strengthen Questions: The steps taken to prove a cause-effect relationship is strong requires the OPPOSITE steps as weakening:
o Prove that when the cause occurs, effect always takes place
o Prove that when effect occurs, it occurs because of the cause.
o Eliminate any other reasons that cause the effect.
o Prove that the relationship between C -> E cannot be reversed.
o Prove that statistical improbability won't occur.

Conclusion is psychologists’ interpretation that says "simply seeing a credit-card logo makes many credit-card holders willing to spend more" because seeing serves a reminder of their spending power.

Our answer should be something that makes our belief stronger in the conclusion.

Which of the following, if true, most strongly supports the psychologists’ interpretation of the studies?

A. The effect noted in the studies is not limited to patrons who have credit cards.
This option is not in the scope of the argument as we are only talking about people who have the credit cards.

B. Patrons who are under financial pressure from their credit-card obligations tend to tip less when presented with a restaurant bill on a tray with credit-card logo than when the tray has no logo.
That means the logo is indeed serving a purpose of reminding them about their CC obligation. This option talks in line with the conclusion we have and definitely helps feeling more certain about the psychologists’ interpretation. Let's keep this option for now.

C. In virtually all of the cases in the studies, the patrons who paid bills in cash did not possess credit cards.
I feel that this options weaken the psychologists’ interpretation by telling us the representation in the study was done by taking wrong set of people.

D. In general, restaurant patrons who pay their bills in cash leave larger tips than do those who pay by credit card.
This is just a general statement and does nothing with the argument at hand.

E. The percentage of restaurant bills paid with a given brand of credit card increases when that credit card’s logo is displayed on the tray with which the bill is prepared.
Like d, E also does nothing with the argument at hand
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Re: QOTD: Studies in restaurants show that the tips left by customers  [#permalink]

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New post 18 Apr 2018, 06:12
GMATNinja wrote:
The passage itself is pretty straightforward:

  • We have the results of the studies: "the tips left by customers who pay their bill in cash tend to be larger when the bill is presented on a tray that bears a credit-card logo." - notice the use of the word "tend". The psychologists are not suggesting that seeing a credit card (CC) logo on the tray will ALWAYS cause an increase in tip amount. In general, seeing a CC logo results in higher tip amounts.
  • And we have an interpretation of those results: "simply seeing a credit-card logo makes many credit-card holders willing to spend more because it reminds them that their spending power exceeds the cash they have immediately available." - notice that this hypothesis only mentions "credit-card holders"

What the heck does that mean? Well, if you have $100 cash in your pocket and don't have any credit cards, then your "spending power" is limited to that cash amount. If you walk into an electronics store and want to buy a fancy television for $1,000, you'll be out of luck.

But what if, in addition to the $100 cash, you have a CC with a $5,000 spending limit? Now your spending power exceeds the amount of cash in your pocket. Sure, you'll have to pay off that credit card in the future, but right now you can walk into that electronics store and buy FIVE of those fancy televisions! The credit card does not actually give you any money, but it certainly increases your present spending power.

So now imagine you are in a restaurant. The bill is $50, and you have $100 cash in your pocket. You decide to leave a 10% tip ($5). But then you notice the credit card logo on the bill tray. This reminds you of the shiny American Express CC in your pocket, and that card has a $5,000 credit limit. You are reminded that your spending power exceeds the $100 cash that you have. So paying a $50 restaurant bill is not going to take away HALF of your spending power. Instead, it will only take away a small portion of your current spending power.

Reminded that you spending power is not limited to the cash, you might decide to leave an even larger tip (maybe $7-10 instead of $5).

Now that we understand the psychologists’ interpretation of the studies, we need something that supports that interpretation:

Quote:
A. The effect noted in the studies is not limited to patrons who have credit cards.

The hypothesis is that the CC logo reminds people that they have a credit card and thus that they have greater spending power. If (A) is true, then the logos cause higher tips even among people who do NOT have credit cards. In that case, the increase can't be explained by the psychologists' hypothesis. (A) weakens the argument, so eliminate this one.

Quote:
B. Patrons who are under financial pressure from their credit-card obligations tend to tip less when presented with a restaurant bill on a tray with credit-card logo than when the tray has no logo.

According to the psychologists, customers tip more when they are reminded that their spending power exceeds the cash they currently have available. If this is true, then we would expect customers to tip LESS when they are reminded that their spending power is LESS than the cash they currently have available.

Huh? Well, think about a man who is in debt. He might have $100 in his pocket, but he owes his friend $500. He might have been ready to give a $5 tip, but as soon as he remembers that he owes money, he decides to give $3-4 instead.

Although choice (B) presents a scenario that is the opposite of the one presented in the passage, both scenarios support the same theory, which is that being reminded of your spending power can impact how much you tip. Generally, this causes people to tip more because they are reminded that their spending power exceeds the cash they have. However, for people in credit card debt, seeing the logo is a reminder that their spending power is actually lower.

So if choice (B) is true, it would support the psychologists' hypothesis. Keep this one.

Quote:
C. In virtually all of the cases in the studies, the patrons who paid bills in cash did not possess credit cards.

As with choice (A), this weakens the argument. The whole idea is that the CC logo reminds you that you have a credit card and, thus, that your spending power is not limited to the cash in your pocket. (C) tells us that the logos caused higher tips even though the patrons did NOT have CC's. This contradicts the hypothesis, so eliminate (C).

Quote:
D. In general, restaurant patrons who pay their bills in cash leave larger tips than do those who pay by credit card.

If anything, this might weaken the hypothesis. People who pay with a CC are obviously aware that they have a credit card. If, as the psychologists suggest, having a CC supposedly makes you aware of your expanded spending power, then why don't the people paying with CC's leave larger tips?

The hypothesis can certainly still work even if (D) is true. Maybe cash patrons tend to tip more for some reason that is unrelated to the study. Regardless, if those people tend to tip even more when they see the CC logo because they are reminded of their expanded spending power, then the psychologists' interpretation would be accurate.

At best, (D) has no impact, but it certainly doesn't strengthen the argument. Eliminate (D).

Quote:
E. The percentage of restaurant bills paid with given brand of credit card increases when that credit card’s logo is displayed on the tray with which the bill is prepared.

This evidence suggests that the logos can be effective as advertising tools. If you see the AMEX logo, you might decide to use your AMEX card instead of cash or instead of your Visa card. But how does that impact your tip amount? The hypothesis is not concerned with whether people actually use CC's. Rather, it is concerned with the cause of the increased tip amounts. (E) is irrelevant.

(B) is the best answer.



I believe I answered this Q correctly when I first saw it but answered incorrectly today now that I am much more advanced in my studies. Ah, the beauty of the GMAT journey! :)

E seems much more appropriate to me in light of everyone's explanations (and I say that knowing it is an OG official Q). My reasoning is as follows.
The argument has two basic assumptions. A. The credit card logo is recognized (whether consciously or subconsciously) by the patron. And B. that such recognition "reminds them that their spending power exceeds the[ir] cash.." There's also 2 more assumptions embedded in the latter (let's say C and D) that a credit card is equivalent to "spending power exceeding one's cash position" (C) and when spending power exceeds a cash position, one is likely to tip more (D).
I feel E (The percentage of restaurant bills paid with a given brand of credit card increases when that credit card’s logo is displayed on the tray with which the bill is prepared.) strengthens the reasoning by strengthening Assumption A with a new data point- credit card logos may be consciously or subconsciously recognized.

The reasoning posed to support B seems far more tenuous and convoluted to me (albeit the OA :). It appears to logically be asserting (although no one phrased exactly in these terms so please let me know if I am mischaracterizing), that:
If X =>(implies) Y, then ~X =>(implying) ~Y strengthens our causal assumption. (Experts: Is this a rule we should remember for the GMAT?) However, since we cannot assume anything about what ~X implies toward "Y", this reasoning seems inapposite. It strikes me as more appropriate for a Method of Reasoning Q, but NOT for a strengthening Q. In fact, it seems to me to weaken the psychologists' interpretation since being reminded about the patron's credit card DOES NOT necessarily imply more spending power NOR does more spending power imply larger tipping. I guess I am saying that a good deal of abstraction (and what I see as convolution) is required to get there. For instance, many experts have interpreted "under financial pressure from their credit-card obligations" to mean that their spending power does NOT exceed their cash position, and such a situation is therefore the opposite of the premise, however, governed by the same reasoning. This assertion is NOT clear to me. It could mean they are late on their bills or they may have debt but it does not exceed their cash position. It's just not well defined and therefore could be addressing a very different group, that we cannot logically make implications from.

For these reasons, E seems like a better response to me because it clearly strengthens one assumption (A) and in no way weakens any other part and requires no new assumptions. I know I am going against the conventional wisdom here, but would love to hear any expert insights. For instance, knowing that ~X=>~Y is a slight strengthener would be incredibly helpful.

Thank you!
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QOTD: Studies in restaurants show that the tips left by customers  [#permalink]

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New post 25 Apr 2018, 04:58
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Quote:
So now imagine you are in a restaurant. The bill is $50, and you have $100 cash in your pocket. You decide to leave a 10% tip ($5). But then you notice the credit card logo on the bill tray. This reminds you of the shiny American Express CC in your pocket, and that card has a $5,000 credit limit. You are reminded that your spending power exceeds the $100 cash that you have. So paying a $50 restaurant bill is not going to take away HALF of your spending power. Instead, it will only take away a small portion of your current spending power.


Does not the argument and your example need to have an implicit assumption that:
the bill amount (including tip) I need to pay and the cash I have in my pocket needs to be equal?

Why is highlighted portion crucial?
I do have still $50$ more in my cash pocket to pay $7 instead of $5
after paying bill of $50 without tip?

Would (E) be the correct choice if it said:

The percentage of restaurant bills paid with credit card increases when that credit card’s logo is displayed on the tray with which the bill is prepared.
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Re: QOTD: Studies in restaurants show that the tips left by customers  [#permalink]

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New post 26 Apr 2018, 22:45
GMATNinja wrote:
The passage itself is pretty straightforward:

  • We have the results of the studies: "the tips left by customers who pay their bill in cash tend to be larger when the bill is presented on a tray that bears a credit-card logo." - notice the use of the word "tend". The psychologists are not suggesting that seeing a credit card (CC) logo on the tray will ALWAYS cause an increase in tip amount. In general, seeing a CC logo results in higher tip amounts.
  • And we have an interpretation of those results: "simply seeing a credit-card logo makes many credit-card holders willing to spend more because it reminds them that their spending power exceeds the cash they have immediately available." - notice that this hypothesis only mentions "credit-card holders"

What the heck does that mean? Well, if you have $100 cash in your pocket and don't have any credit cards, then your "spending power" is limited to that cash amount. If you walk into an electronics store and want to buy a fancy television for $1,000, you'll be out of luck.

But what if, in addition to the $100 cash, you have a CC with a $5,000 spending limit? Now your spending power exceeds the amount of cash in your pocket. Sure, you'll have to pay off that credit card in the future, but right now you can walk into that electronics store and buy FIVE of those fancy televisions! The credit card does not actually give you any money, but it certainly increases your present spending power.

So now imagine you are in a restaurant. The bill is $50, and you have $100 cash in your pocket. You decide to leave a 10% tip ($5). But then you notice the credit card logo on the bill tray. This reminds you of the shiny American Express CC in your pocket, and that card has a $5,000 credit limit. You are reminded that your spending power exceeds the $100 cash that you have. So paying a $50 restaurant bill is not going to take away HALF of your spending power. Instead, it will only take away a small portion of your current spending power.

Reminded that you spending power is not limited to the cash, you might decide to leave an even larger tip (maybe $7-10 instead of $5).

Now that we understand the psychologists’ interpretation of the studies, we need something that supports that interpretation:

Quote:
A. The effect noted in the studies is not limited to patrons who have credit cards.

The hypothesis is that the CC logo reminds people that they have a credit card and thus that they have greater spending power. If (A) is true, then the logos cause higher tips even among people who do NOT have credit cards. In that case, the increase can't be explained by the psychologists' hypothesis. (A) weakens the argument, so eliminate this one.

Quote:
B. Patrons who are under financial pressure from their credit-card obligations tend to tip less when presented with a restaurant bill on a tray with credit-card logo than when the tray has no logo.

According to the psychologists, customers tip more when they are reminded that their spending power exceeds the cash they currently have available. If this is true, then we would expect customers to tip LESS when they are reminded that their spending power is LESS than the cash they currently have available.

Huh? Well, think about a man who is in debt. He might have $100 in his pocket, but he owes his friend $500. He might have been ready to give a $5 tip, but as soon as he remembers that he owes money, he decides to give $3-4 instead.

Although choice (B) presents a scenario that is the opposite of the one presented in the passage, both scenarios support the same theory, which is that being reminded of your spending power can impact how much you tip. Generally, this causes people to tip more because they are reminded that their spending power exceeds the cash they have. However, for people in credit card debt, seeing the logo is a reminder that their spending power is actually lower.

So if choice (B) is true, it would support the psychologists' hypothesis. Keep this one.

Quote:
C. In virtually all of the cases in the studies, the patrons who paid bills in cash did not possess credit cards.

As with choice (A), this weakens the argument. The whole idea is that the CC logo reminds you that you have a credit card and, thus, that your spending power is not limited to the cash in your pocket. (C) tells us that the logos caused higher tips even though the patrons did NOT have CC's. This contradicts the hypothesis, so eliminate (C).

Quote:
D. In general, restaurant patrons who pay their bills in cash leave larger tips than do those who pay by credit card.

If anything, this might weaken the hypothesis. People who pay with a CC are obviously aware that they have a credit card. If, as the psychologists suggest, having a CC supposedly makes you aware of your expanded spending power, then why don't the people paying with CC's leave larger tips?

The hypothesis can certainly still work even if (D) is true. Maybe cash patrons tend to tip more for some reason that is unrelated to the study. Regardless, if those people tend to tip even more when they see the CC logo because they are reminded of their expanded spending power, then the psychologists' interpretation would be accurate.

At best, (D) has no impact, but it certainly doesn't strengthen the argument. Eliminate (D).

Quote:
E. The percentage of restaurant bills paid with given brand of credit card increases when that credit card’s logo is displayed on the tray with which the bill is prepared.

This evidence suggests that the logos can be effective as advertising tools. If you see the AMEX logo, you might decide to use your AMEX card instead of cash or instead of your Visa card. But how does that impact your tip amount? The hypothesis is not concerned with whether people actually use CC's. Rather, it is concerned with the cause of the increased tip amounts. (E) is irrelevant.

(B) is the best answer.


Hi GMATNinja

Great explanation as usual .
I have one more possible reason to reject E .
People have multiple credit cards so this choice is irrelevant .
Please share your thoughts on this .
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Re: QOTD: Studies in restaurants show that the tips left by customers  [#permalink]

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New post 03 May 2018, 17:44
adkikani wrote:
GMATNinja VeritasPrepKarishma

Quote:
So now imagine you are in a restaurant. The bill is $50, and you have $100 cash in your pocket. You decide to leave a 10% tip ($5). But then you notice the credit card logo on the bill tray. This reminds you of the shiny American Express CC in your pocket, and that card has a $5,000 credit limit. You are reminded that your spending power exceeds the $100 cash that you have. So paying a $50 restaurant bill is not going to take away HALF of your spending power. Instead, it will only take away a small portion of your current spending power.


Does not the argument and your example need to have an implicit assumption that:
the bill amount (including tip) I need to pay and the cash I have in my pocket needs to be equal?

Why is highlighted portion crucial?
I do have still $50$ more in my cash pocket to pay $7 instead of $5
after paying bill of $50 without tip?

Would (E) be the correct choice if it said:

The percentage of restaurant bills paid with credit card increases when that credit card’s logo is displayed on the tray with which the bill is prepared.

The highlighted portion is important because it relates the tip amount to your spending power. Without the credit card, spending $5 on the tip lowers your perceived spending power from $50 to $45... true, you still have some cash, but you are aware that your balance is getting closer and closer to zero so you might not want to leave a larger tip. However, if you have a credit card with a $5,000 limit, now that $5 tip only represents a tiny fraction of your perceived spending power.

This is what was meant by the sentence after the highlighted portion:

    So paying a $50 restaurant bill is not going to take away HALF of your spending power. Instead, it will only take away a small portion of your current spending power.

arvind910619 wrote:
Hi GMATNinja

Great explanation as usual .
I have one more possible reason to reject E .
People have multiple credit cards so this choice is irrelevant .
Please share your thoughts on this .

Thank you for the kind words, arvind910619! And yes, (E) has to do with people choosing one brand of credit card over the other, which is irrelevant to the hypothesis.

adkikani, if (E) is changed as you suggested, it still doesn't tell us anything about tip amounts, so it would still be irrelevant.
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Re: QOTD: Studies in restaurants show that the tips left by customers  [#permalink]

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New post 04 Aug 2018, 04:29
GMATNinja wrote:
The passage itself is pretty straightforward:

  • We have the results of the studies: "the tips left by customers who pay their bill in cash tend to be larger when the bill is presented on a tray that bears a credit-card logo." - notice the use of the word "tend". The psychologists are not suggesting that seeing a credit card (CC) logo on the tray will ALWAYS cause an increase in tip amount. In general, seeing a CC logo results in higher tip amounts.
  • And we have an interpretation of those results: "simply seeing a credit-card logo makes many credit-card holders willing to spend more because it reminds them that their spending power exceeds the cash they have immediately available." - notice that this hypothesis only mentions "credit-card holders"

What the heck does that mean? Well, if you have $100 cash in your pocket and don't have any credit cards, then your "spending power" is limited to that cash amount. If you walk into an electronics store and want to buy a fancy television for $1,000, you'll be out of luck.

But what if, in addition to the $100 cash, you have a CC with a $5,000 spending limit? Now your spending power exceeds the amount of cash in your pocket. Sure, you'll have to pay off that credit card in the future, but right now you can walk into that electronics store and buy FIVE of those fancy televisions! The credit card does not actually give you any money, but it certainly increases your present spending power.

So now imagine you are in a restaurant. The bill is $50, and you have $100 cash in your pocket. You decide to leave a 10% tip ($5). But then you notice the credit card logo on the bill tray. This reminds you of the shiny American Express CC in your pocket, and that card has a $5,000 credit limit. You are reminded that your spending power exceeds the $100 cash that you have. So paying a $50 restaurant bill is not going to take away HALF of your spending power. Instead, it will only take away a small portion of your current spending power.

Reminded that you spending power is not limited to the cash, you might decide to leave an even larger tip (maybe $7-10 instead of $5).

Now that we understand the psychologists’ interpretation of the studies, we need something that supports that interpretation:


Quote:
B. Patrons who are under financial pressure from their credit-card obligations tend to tip less when presented with a restaurant bill on a tray with credit-card logo than when the tray has no logo.

According to the psychologists, customers tip more when they are reminded that their spending power exceeds the cash they currently have available. If this is true, then we would expect customers to tip LESS when they are reminded that their spending power is LESS than the cash they currently have available.

Huh? Well, think about a man who is in debt. He might have $100 in his pocket, but he owes his friend $500. He might have been ready to give a $5 tip, but as soon as he remembers that he owes money, he decides to give $3-4 instead.

Although choice (B) presents a scenario that is the opposite of the one presented in the passage, both scenarios support the same theory, which is that being reminded of your spending power can impact how much you tip. Generally, this causes people to tip more because they are reminded that their spending power exceeds the cash they have. However, for people in credit card debt, seeing the logo is a reminder that their spending power is actually lower.

So if choice (B) is true, it would support the psychologists' hypothesis. Keep this one.


Dear GMATNinja, your explanation is excellent,

would you please elaborate further because i have a question that seems not be discussed.
the conclusion states a causation that simply seeing a credit-card logo makes many credit-card holders willing to spend more because it reminds them that their spending power exceeds the cash they have immediately available.
what we need to strengthen the conclusion is something that make the conclusion more likely valid.
i read a lot of discuss, almost points out a theory, which is that being reminded of your spending power can impact how much you tip., as you mentioned above.


I am not sure what i missed, how can i grasp the theory? does the conclusion state causation between more remind,more powerful, and more tips?
I understand B states an oppoiste the theory, it supports the general theory, while the arguments does not state a general theory, it concludes a causation between more remind, more powerful, more tips.

it confuses me a lt.
Please help,

Hi mikemcgarry, GMATNinjaTwo, MagooshExpert Carolyn,
sayantanc2
VeritasPrepKarishma

if you experts are available, please suggest.

Thanks in advance
Have a nice day

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Re: QOTD: Studies in restaurants show that the tips left by customers  [#permalink]

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New post 23 Aug 2018, 09:40
zoezhuyan wrote:
would you please elaborate further because i have a question that seems not be discussed.
the conclusion states a causation that simply seeing a credit-card logo makes many credit-card holders willing to spend more because it reminds them that their spending power exceeds the cash they have immediately available.
what we need to strengthen the conclusion is something that make the conclusion more likely valid.
i read a lot of discuss, almost points out a theory, which is that being reminded of your spending power can impact how much you tip., as you mentioned above.

I am not sure what i missed, how can i grasp the theory? does the conclusion state causation between more remind,more powerful, and more tips?
I understand B states an oppoiste the theory, it supports the general theory, while the arguments does not state a general theory, it concludes a causation between more remind, more powerful, more tips.

it confuses me a lt.

I don't think you've missed anything. :) Instead, you may be trying to link too much together in your identification of the conclusion.

The author concludes that seeing a logo makes many credit-card holders tip more because it reminds them of their current spending power. The key link is between seeing the logo and remembering whatever their level of spending power is. As we see with choice (B), some credit-card holders could then remember that they have no spending power, and ultimately tip less. This still supports the conclusion because seeing the logo caused the card holder to think about spending power and incorporate those thoughts into their tip amount.

Furthermore, we don't need to reach for a "general theory" because the argument focuses on many credit-card holders. We just need to support the conclusion as it applies to that population.

I hope this helps!
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Re: QOTD: Studies in restaurants show that the tips left by customers &nbs [#permalink] 23 Aug 2018, 09:40
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