Official Explanation
Answer: C - Firm management believes that flex-time will help meet three goals: (1) decrease total costs (2) increase productivity (3) improve product quality.
If the firm's research work requires considerable in-person collaboration, three hours a day of time together will not be sufficient and the firm's plan will lead to decreases in productivity and product quality. This will weaken the management's argument since its plan will not achieve two of its three goals.
A. The presence of new costs associated with flex-time does not weaken the argument that flex-time will decrease total cost as it may well be the case that cost savings outweigh cost increases. In other words, this answer only deals with one side of the equation (cost increases) and not the other side (cost decreases). Consequently, the answer does not enable us to conclude that the argument is weakened since it is entirely possible that on balance, costs will be reduced.
B. Since the firm abandoned it for "unknown reasons," we cannot make a conclusion about the affect of flex-time on costs, productivity, and product quality. It is entirely possible that the competitor abandoned flex-time for reasons not related to these three reasons and, therefore, for reasons not relevant to the argument of the management of the boutique research firm.
C. Since the firm in question performs work that requires frequent and in-person collaboration, it is reasonable to infer that cutting the time spent together at work down from 9 to 3 hours will have a considerable affect on productivity and quality as workers will have severely restricted access to a crucial component of their work (i.e., co-workers).
D. This answer strengthens the argument instead of weakening it. Further, using one employee's situation as an example is not the best grounds to critique an argument.
E. The duration of the project (in and of itself) has nothing to do with costs, productivity, or product quality. Given the information in the question and in this answer, an argument could be made that flex-time will increase quality (employees enjoy their work more with flex-time and work harder).