Thousands of people work at G. Handy's, an inexpensive fast-food resta

A Only a very small part of the 70 percent of operating expenses paid by the restaurant chain for employee compensation goes to pay managers.
>>only exlplains why cost increases

B People who earn minimum wage, or who rely on the earnings of others who do, comprise most of the restaurant chain’s customer base.
>>exlplains why cost increases + possibility of amount of money spent by customers increase

C Other expenses of the restaurant chain rose dramatically after the wage hike, for reasons unrelated to the minimum wage raise.
>>only exlplains why cost increases

D The restaurant chain decided to increase wages for managerial employees who were making slightly more than minimum wage simultaneously with the minimum wage increase.
>>only exlplains why cost increases

E Cashiers and cooks, who are usually paid minimum wage, comprise most of the staff at the restaurant chain.
>>only exlplains why cost increases

Hence my Vote for B

Thousands of people work at G. Handy's, an inexpensive fast-food restaurant chain that pays most of its employees minimum wage. Even though new laws forced an increase in the minimum wage, and thus substantially raised the restaurant chain's labor costs, its profits also rose substantially.

Which of the following, if true, most helps to resolve the apparent paradox?


A Only a very small part of the 70 percent of operating expenses paid by the restaurant chain for employee compensation goes to pay managers.
Incorrect - We need to answer why profits went up, this doesn't talk about that.

B People who earn minimum wage, or who rely on the earnings of others who do, comprise most of the restaurant chain’s customer base.
Correct - If most people that come to the restaurant are earning minimum wage and they now have more income we can assume they will
spend more, I know its a lousy answer but its the only one that makes sense.

C Other expenses of the restaurant chain rose dramatically after the wage hike, for reasons unrelated to the minimum wage raise.
Incorrect - This should decrease profits in fact.

D The restaurant chain decided to increase wages for managerial employees who were making slightly more than minimum wage simultaneously with the minimum wage increase.
Incorrect - Doesn't talk about profits.

E Cashiers and cooks, who are usually paid minimum wage, comprise most of the staff at the restaurant chain.
Incorrect - This doesn't tell us why the profit increased.

IMO B
The Paradox is that despite increasing its Labor costs, its profits also rose substantially.

We need to find an option that will explain how the labor cost is linked with the growth in profit.

A Only a very small part of the 70 percent of operating expenses paid by the restaurant chain for employee compensation goes to pay managers. – this doesn’t clarify the required relation

B People who earn minimum wage, or who rely on the earnings of others who do, comprise most of the restaurant chain’s customer base. – Correct (if earning more by people resulted in more spending in hotel then it will justify why the profit of the hotel gone up)

C Other expenses of the restaurant chain rose dramatically after the wage hike, for reasons unrelated to the minimum wage raise. – Not concerned with other expenses going up

D The restaurant chain decided to increase wages for managerial employees who were making slightly more than minimum wage simultaneously with the minimum wage increase. – again, no such clarification of required relation

E Cashiers and cooks, who are usually paid minimum wage, comprise most of the staff at the restaurant chain. – again, no such clarification of required relation

Thousands of people work at G. Handy's
>>G. Handy has 1000 employees

an inexpensive fast-food restaurant chain
>>In expensive fast food restaurant
(mostly people with min wages will come here)

that pays most of its employees minimum wage.
>>G. Handy has employees with min wages.

Even though new laws forced an increase in the minimum wage, and
>>Min Wages increase for all min wage people, including the restraurant and other min wager earners
Overall earning increase for all G Handy's customer data base

thus substantially raised the restaurant chain's labor costs,
Overall its profits also rose substantially
>> 1000 employess required to handle more customer with min wages, who regularly visit the restaurant.
Increase in spending salary of 1000 employees = more earning from min wages customer

Exactly: option B is the correct choice.
B People who earn minimum wage,
or who rely on the earnings of others who do, (restaurant employees)
comprise most of the restaurant chain’s customer base (max low wage customers)

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