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# The Calex Telecommunications Company is planning to

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The Calex Telecommunications Company is planning to [#permalink]

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14 Sep 2012, 23:51
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The Calex Telecommunications Company is planning to introduce cellular telephone service into isolated coastal areas of Caladia, a move which will require considerable investment. However, the only significant economic activity in these areas is small-scale coffee farming, and none of the coffee farmers make enough money to afford the monthly service fees that Calex would have to charge to make a profit. Nevertheless, Calex contends that making the service available to these farmers will be profitable.

Which of the following, if true, provides the strongest support for Calex's contention?

(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.
(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.
(C) A cellular telephone company can break even with a considerably smaller number of subscribers than a fixed-line 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.
(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.
(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.
[Reveal] Spoiler: OA

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Re: The Calex Telecommunications company [#permalink]

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27 Dec 2012, 08:58
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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.

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Re: The Calex Telecommunications company [#permalink]

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26 Dec 2012, 21:34
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The Calex Telecommunications Company is planning to introduce cellular telephone service into isolated coastal
areas of Caladia, a move which will require considerable investment. However, the only significant economic
activity in these areas is small-scale coffee farming, and none of the coffee farmers make enough money to
afford the monthly service fees that Calex would have to charge to make a profit
. Nevertheless, Calex contends
that making the service available to these farmers will be profitable.

The situation here is that Calex is introducing a new phone in area not much economic activity so their target customers are farmers. Now farmers say if they buy this service they can't make profit but calex says if they offer this service to farmers calex will make profits. we need to bridge that gap. Find a reason why farmers will use the service at the same time how can calex make profit.

Which of the following, if true,provides the strongest support for Calex's contention?

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.

A does bridge the gap its giving us a reason how farmers will make profit, since they are able to contact outside buyers thru the calex service provided ( the passage doesn't mention any other cellular firms ). Hence, farmers will be able to make profits and calex claim is strongly supported that the farmers are using the service.

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.

Irrelevant doesn't explain how farmers can make profit.

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.

Irrelevant its talking about fixedline companies we need a reason why farmers will use this service.

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.

Irrelevant we don't have a reason why farmers will buy the service.

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.

Again irrelevant

I didn't find any answer choice as a close contender, it was a an easy A.

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Re: The Calex Telecommunications [#permalink]

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15 Sep 2012, 04:26
Arbitrageur wrote:
The Calex Telecommunications Company is planning to introduce cellular telephone service into isolated coastal areas of Caladia, a move which will require considerable investment. However, the only significant economic activity in these areas is small-scale coffee farming, and none of the coffee farmers make enough money to afford the monthly service fees that Calex would have to charge to make a profit. Nevertheless, Calex contends that making the service available to these farmers will be profitable.

Which of the following, if true, provides the strongest support for Calex's contention?

(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. -Strengthens
(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.-Irrelevant, no relation b/w fixed line and cellular service, we cannot assume anything.
(C) A cellular telephone company can break even with a considerably smaller number of subscribers than a fixed-line 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.-- not sufficient as we are not talking about competition and we don't know whether fixed lines companies are making profits.
(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.--no relation with the argument.
(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.-A shell game answer, and we cannot generalize.

This is a straight forward question. Answer is A.

Option 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.

Premise: The only significant economic activity in these areas is small-scale coffee farming, and none of the coffee farmers make enough money to afford the monthly service fees that Calex would have to charge to make a profit.
Option A.) It is clear from the premise and option A that ,if the cellular phone helps the Caladian coffee farmers with their profits, Calex can definitely charge these farmers appropriately to make profits.
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Re: The Calex Telecommunications company [#permalink]

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26 Dec 2012, 22:02
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.
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Re: The Calex Telecommunications company [#permalink]

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26 Dec 2012, 23:00
Marcab wrote:
The Calex Telecommunications Company is planning to introduce cellular telephone service into isolated coastal
areas of Caladia, a move which will require considerable investment. However, the only significant economic
activity in these areas is small-scale coffee farming, and none of the coffee farmers make enough money to
afford the monthly service fees that Calex would have to charge to make a profit. Nevertheless, Calex contends
that making the service available to these farmers will be profitable. Which of the following, if true,
provides the strongest support for Calex's contention?
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.
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.
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.
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.
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.

Explanations will be appreciated.

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.

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Re: The Calex Telecommunications company [#permalink]

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27 Dec 2012, 06:53
Marcab wrote:
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.

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.

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Re: The Calex Telecommunications company [#permalink]

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27 Dec 2012, 07:10
Marcab wrote:
The Calex Telecommunications Company is planning to introduce cellular telephone service into isolated coastal
areas of Caladia, a move which will require considerable investment. However, the only significant economic
activity in these areas is small-scale coffee farming, and none of the coffee farmers make enough money to
afford the monthly service fees that Calex would have to charge to make a profit. Nevertheless, Calex contends
that making the service available to these farmers will be profitable. Which of the following, if true,
provides the strongest support for Calex's contention?
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.
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.
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.
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.
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.

Explanations will be appreciated.

Hii Vineet.
I am just putting up my and one of my friend's opinion upon the solution.
Quote:
If phones are available, farmers will use it as they will make profit.

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.
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Re: The Calex Telecommunications company [#permalink]

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27 Dec 2012, 07:14
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.
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Re: The Calex Telecommunications company [#permalink]

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27 Dec 2012, 07:28
Marcab wrote:
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.

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Re: The Calex Telecommunications company [#permalink]

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27 Dec 2012, 07:35
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.
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Re: The Calex Telecommunications company [#permalink]

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27 Dec 2012, 07:37
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.

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Re: The Calex Telecommunications company [#permalink]

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27 Dec 2012, 07:42
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.
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Re: The Calex Telecommunications company [#permalink]

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27 Dec 2012, 07:48
Vineetk wrote:
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.

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.
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Re: The Calex Telecommunications company [#permalink]

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27 Dec 2012, 08:27
Marcab wrote:
Vineetk wrote:
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.

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.

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Re: The Calex Telecommunications company [#permalink]

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27 Dec 2012, 08:33
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.

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Re: The Calex Telecommunications company [#permalink]

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31 Dec 2012, 12:15
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
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Re: The Calex Telecommunications Company is planning to [#permalink]

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05 Jul 2013, 08:20
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.

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Re: The Calex Telecommunications Company is planning to introduce cellular [#permalink]

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29 Dec 2016, 09:05
soumya170293 wrote:
The Calex Telecommunications Company is planning to introduce cellular telephone service into isolated coastal areas of Caladia, a move which will require considerable investment. However, the only significant economic activity in these areas is small-scale coffee farming, and none of the coffee farmers make enough money to afford the monthly service fees that Calex would have to charge to make a profit. Nevertheless, Calex contends that making the service available to these farmers will be profitable.

Which of the following, if true, provides the strongest support for Calex's contention?

(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.
(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.
(C) A cellular telephone company can break even with a considerably smaller number of subscribers than a fixed-line 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.
(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.
(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

source is Gmat Prep
OA is A.
Kindly Explain it??

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.

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The Calex Telecommunications Company is planning to introduce cellular [#permalink]

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29 Dec 2016, 19:19
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.

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