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Country X imposes heavy tariffs on imported manufactured

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Country X imposes heavy tariffs on imported manufactured [#permalink] New post 01 Aug 2009, 12:59
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Country X imposes heavy tariffs on imported manufactured goods. Company Y has determined that it could increase its profits in the long term by opening a factory in Country X to manufacture the goods that it currently produces in its home country for sale in Country X.

For Company Y's determination to be true, which of the following assumptions must also be true?

a Company Y will be able to obtain all the necessary permits to open a factory in Country X.
b Company Y currently produces no goods outside its home country.
c A sustainable market for Company Y's goods currently exists in Country X.
d Company Y's home country does not impose tariffs on imported goods.
e Labor costs in Country X are lower than those in Company Y's home country.
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Re: Country X [#permalink] New post 01 Aug 2009, 14:25
c cozthen only it has a reason to go to x
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Re: Country X [#permalink] New post 01 Aug 2009, 14:46
mostwantedjatt wrote:
c cozthen only it has a reason to go to x


Yes, but Y is looking for profit in the long term, so it´s not necessary a CURRENT market in X. In fact, Y can create that market and reach those profits in the long run...
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Re: Country X [#permalink] New post 02 Aug 2009, 02:28
C is the best answer given the options

Noboru - i think you are assuming too much and thinking beyond the problem. :wink:

noboru wrote:
mostwantedjatt wrote:
c cozthen only it has a reason to go to x


Yes, but Y is looking for profit in the long term, so it´s not necessary a CURRENT market in X. In fact, Y can create that market and reach those profits in the long run...

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Re: Country X [#permalink] New post 02 Aug 2009, 03:19
What about E?
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Re: Country X [#permalink] New post 02 Aug 2009, 05:02
I think A and E are in the same boat. We can go on and on about different factors affecting cost.

what if labor costs are lower but overhead costs are higher?
Key thing driving the whole issue is sales/mkt
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Re: Country X [#permalink] New post 02 Aug 2009, 08:34
snipertrader wrote:
I think A and E are in the same boat. We can go on and on about different factors affecting cost.

what if labor costs are lower but overhead costs are higher?
Key thing driving the whole issue is sales/mkt


C is a good call. no sustainable market no long term profits
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Country X [#permalink] New post 03 Aug 2009, 19:01
I was dangling between C and E. But couldnt figure out a way to eliminate C or E.

Nice explanation guys ... " long term profit" ---> "sustainable market"
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Re: Country X [#permalink] New post 03 Aug 2009, 19:26
Tough one.

My explantion: Any business that aims to increase profits has to determine whether there is a market for its product. If no market exists, then you dont even need to bother about relative costs.
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Re: Country X [#permalink] New post 04 Aug 2009, 09:51
What is OA? C?
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Re: Country X [#permalink] New post 04 Aug 2009, 15:32
I think the answer is A. without any permits, It can gain the goal.

C : Y has already its market for its products in Contry X, as passage said.
also, sustainable market is not neccessary condition for moving to. Without moving, Y still can access to the market. But profit would be less because of the tarriffs

E : Labor cost is not neccessay condition. other costs may also affects Y's profit
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Re: Country X [#permalink] New post 04 Aug 2009, 19:18
I too would go for A. What is the OA, noboru?
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Re: Country X [#permalink] New post 05 Aug 2009, 06:10
C it is.

Between C and E, E could be ruled out as labour cost is not the only factor that decides profitability. What if the cost of raw material is higher?? Or any other such factors

On the other hand, If there is no demand for the company Y's products in country X then the company cannot make profits even if the labor cost is lower than Company Y's home country
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Re: Country X [#permalink] New post 05 Aug 2009, 07:35
C for me
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Re: Country X [#permalink] New post 06 Aug 2009, 11:00
sdrandom1 wrote:
I too would go for A. What is the OA, noboru?


OA is C.

Good discussion.

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Re: Country X   [#permalink] 06 Aug 2009, 11:00
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