The Calex Telecommunications Company is planning to

Question

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.

conty911 · Accepted Answer

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.

nelz007 · Answer

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.

pritish2301 · Answer

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.

architkap · Answer

I chose A, but very hesitantly as technically its just a loop right? How are they ever going to afford the monthly payment if they don't earn enough? To increase earnings they need to get the service so they can contact outside customers, and they can't contact them without the cell service. Is this not just a never ending loop? Are we genuinely just assuming that the farmers are willing to go poor and stay hungry for a month to afford the service in hopes of breaking the loop? 
Aren't we making many assumptions picking A?

Is this kind of convoluted question still asked in Focus Edition?  Bunuel   KarishmaB   GMATNinja  would appreciate your 2 cents.

guddo · Answer

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?

The problem is that the farmers currently cannot afford Calex’s monthly fees. So the best support should explain how the phone service could make the farmers better able to pay those fees.  The key idea  is that the service itself may increase the farmers’ income by giving them access to better buyers.

(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.

This is correct. If cellular service allows farmers to contact outside buyers who pay higher prices, the farmers may earn more money. That makes it more plausible that they could afford Calex’s monthly fees, so the service could become  profitable  for Calex.

(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.

This does not support Calex’s claim. If fixed-line companies think they cannot recover their investment, that may suggest the area is not profitable.

(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.

This helps somewhat, but it does not address the main issue: the farmers currently cannot afford the monthly fees.

(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.

This does not help. If installation costs are high, the required monthly fees may also be high.

(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.

This is weak. Profit in the capital city does not show that poor farmers in isolated coastal areas can afford the service.

Answer: (A)

guddo · Answer

The “loop” concern is understandable, but it is too strict for a strengthen question.

(A) does  not  need to prove exactly how farmers pay the first monthly fee. It only needs to make Calex’s profitability more likely.

Right now, farmers are poor partly because they are stuck selling to local buyers at low prices. If phone service lets them reach outside buyers who pay more, then the service could increase their income and make the fees more affordable.

So we are not assuming the farmers “stay hungry” to pay for service. We are saying that (A) gives a plausible path by which the service helps solve the  affordability problem .

egmat · Answer

Hi architkap,

Your instinct that there's a loop is sharp, and it's exactly what Vineet and Marcab were tugging over earlier in the thread. But two things dissolve the worry.

First: "support" is not "prove."  The stem asks which choice  provides the strongest support  for Calex's contention - not which one guarantees it. In CR, a strengthener only has to make the conclusion  more plausible . So you don't need A to lock in that every farmer will pay every month. You just need it to give a believable reason why the affordability wall might come down. Once you drop the demand for a guarantee, the "too many assumptions" feeling eases - you're allowed a gap, as long as the choice pushes in the right direction.

Second: it's not actually a closed loop.  Look at the exact words of A: 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 farmers already  have coffee to sell  - their income is being held down artificially by lack of contact, not by lack of coffee. The service lets them reach higher-paying buyers, so their earnings rise. There's no chicken-and-egg trap: the crop is already there; the phone just unlocks a better price for it.

A quick stand-in to feel the "support" bar:

A student can't afford a  $200  tutor. New fact: this tutor reliably lifts scores enough to win scholarships worth thousands.

Does that  prove  the student will enroll and pay? No. But does it  support  the claim that the tutoring business can profit here? Absolutely - it gives a real mechanism for the money to appear. A does the same thing for Calex. That's why it's the strongest choice, even though it stops short of certainty.

Answer: A

The Calex Telecommunications Company is planning to

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The Calex Telecommunications Company is planning to

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