Find all School-related info fast with the new School-Specific MBA Forum

It is currently 22 Jul 2014, 11:48

Close

GMAT Club Daily Prep

Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.

Customized
for You

we will pick new questions that match your level based on your Timer History

Track
Your Progress

every week, we’ll send you an estimated GMAT score based on your performance

Practice
Pays

we will pick new questions that match your level based on your Timer History

Not interested in getting valuable practice questions and articles delivered to your email? No problem, unsubscribe here.

Events & Promotions

Events & Promotions in June
Open Detailed Calendar

Country X imposes heavy tariffs on imported manufactured

  Question banks Downloads My Bookmarks Reviews Important topics  
Author Message
TAGS:
Manager
Manager
avatar
Joined: 16 Mar 2011
Posts: 190
Followers: 1

Kudos [?]: 4 [0], given: 1

GMAT Tests User
Re: country X and country Y [#permalink] New post 13 May 2011, 21:28
garimavyas wrote:
i think the question is nonsensical and from some absurd and unreliable source.

I do agree with you, since any way i think about it, one can not really fully eliminate answer choice A and you need to stretch to reach C
Senior Manager
Senior Manager
User avatar
Joined: 13 Aug 2012
Posts: 464
Concentration: Marketing, Finance
GMAT 1: Q V0
GPA: 3.23
Followers: 14

Kudos [?]: 178 [0], given: 11

GMAT ToolKit User GMAT Tests User
Re: Country X imposes heavy tariffs on imported manufactured [#permalink] New post 18 Jan 2013, 22:18
Country Y pays tariff for their exported goods to Country X (or imported goods of Country X from Y)...
Country Y plans to manufacture in Country X and feels that will increase profits...

C and E seems to be confusing for others... BUT Labor Costs is only one of the many possible factors to contribute to decrease in profits... The argument did not mention exactly possible factors that will contribute to increase profits... BUT (C) is a basic requriement to making sales... to have a sustainable market.. If there is no such, then there is no long-term profitability..

Answer: C
_________________

Impossible is nothing to God.

Verbal Forum Moderator
Verbal Forum Moderator
User avatar
Joined: 15 Jun 2012
Posts: 992
Location: United States
Followers: 112

Kudos [?]: 1094 [0], given: 118

Re: Country X imposes heavy tariffs on imported manufactured [#permalink] New post 28 Aug 2013, 22:25
jaituteja wrote:
Hi pqhai,

Can you help me with this one.

country-x-imposes-heavy-tariffs-on-imported-manufactured-87003-20.html

I am confused b/w A,C and E.


Hi Jai

I'm happy to help.

ANALYZE THE ARGUMENT:

Fact: Country X imposes heavy tariffs on imported manufactured goods.
Conclusion: 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.

KEY words: “profits the long term”. If Y wants to make profits in the long term, it MUST be able to sell its products. If Y can't sell its products, the strategy will fail.

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

ANALYZE EACH ANSWER:

Company Y will be able to obtain all the necessary permits to open a factory in Country X.
Wrong. Obtain all permits does NOT guarantee that Y can sell products and have long term profits. Selling products does not depend on acquiring permits ONLY.

Company Y currently produces no goods outside its home country.
Wrong. It’s fact. B cannot be the assumption. Clearly, fact is not an assumption.

A sustainable market for Company Y's goods currently exists in Country X.
Correct. Key word is “sustainable market”. C means customers in country X are willing to buy Y’s goods for long term. That is the key for Y’s dermination to be true.

Company Y's home country does not impose tariffs on imported goods.
Wrong. Out of scope. The argument does not talk about the tariff policies in country Y.

Labor costs in Country X are lower than those in Company Y's home country.
Wrong. Quite Tempting. Labor costs is just one of many costs involving the manufacturing process. What if labor costs are lower in Country X, but other costs such as rent, electricity, insurances, etc… are higher than those in Country Y. Thus cost of good sold of Y’s goods is high, making prices for Y’s good not competitive.

Hope it helps.
_________________

Please +1 KUDO if my post helps. Thank you.

"Designing cars consumes you; it has a hold on your spirit which is incredibly powerful. It's not something you can do part time, you have do it with all your heart and soul or you're going to get it wrong."

Chris Bangle - Former BMV Chief of Design.

Manager
Manager
avatar
Joined: 21 Aug 2012
Posts: 150
Followers: 2

Kudos [?]: 32 [0], given: 41

Re: Country X imposes heavy tariffs on imported manufactured [#permalink] New post 28 Aug 2013, 23:04
pqhai wrote:
jaituteja wrote:
Hi pqhai,

Can you help me with this one.

country-x-imposes-heavy-tariffs-on-imported-manufactured-87003-20.html

I am confused b/w A,C and E.


Hi Jai

I'm happy to help.

ANALYZE THE ARGUMENT:

Fact: Country X imposes heavy tariffs on imported manufactured goods.
Conclusion: 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.

KEY words: “profits the long term”. If Y wants to make profits in the long term, it MUST be able to sell its products. If Y can't sell its products, the strategy will fail.

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

ANALYZE EACH ANSWER:

Company Y will be able to obtain all the necessary permits to open a factory in Country X.
Wrong. Obtain all permits does NOT guarantee that Y can sell products and have long term profits. Selling products does not depend on acquiring permits ONLY.

Company Y currently produces no goods outside its home country.
Wrong. It’s fact. B cannot be the assumption. Clearly, fact is not an assumption.

A sustainable market for Company Y's goods currently exists in Country X.
Correct. Key word is “sustainable market”. C means customers in country X are willing to buy Y’s goods for long term. That is the key for Y’s dermination to be true.

Company Y's home country does not impose tariffs on imported goods.
Wrong. Out of scope. The argument does not talk about the tariff policies in country Y.

Labor costs in Country X are lower than those in Company Y's home country.
Wrong. Quite Tempting. Labor costs is just one of many costs involving the manufacturing process. What if labor costs are lower in Country X, but other costs such as rent, electricity, insurances, etc… are higher than those in Country Y. Thus cost of good sold of Y’s goods is high, making prices for Y’s good not competitive.

Hope it helps.


Hi pqhai,

What if i say that a sustainable market is necessary, but if the company X is not able to produce goods due to higher restriction, would there be any production.

For E,
Profits= Revenue - Expense,
Not if Labor cost in X is < Labor cost in Y,
then profits will increase.

I agree that sustainable market should be there to sell goods, but to sell good one needs to produce them first.

Our motive is to increase profitability......
Goods produced ---> Good sold ----> profitability increased

For C, if i say that amount saved from non-importing is less than the increase in cost of raw materials/rent/expenses while switching to country X, so even if sustainable market is there, the profitability will decrease in that case..


Thanks,
Jai
_________________

MODULUS Concept ---> inequalities-158054.html#p1257636
HEXAGON Theory ---> hexagon-theory-tips-to-solve-any-heaxgon-question-158189.html#p1258308

1 KUDOS received
Verbal Forum Moderator
Verbal Forum Moderator
User avatar
Joined: 15 Jun 2012
Posts: 992
Location: United States
Followers: 112

Kudos [?]: 1094 [1] , given: 118

Re: Country X imposes heavy tariffs on imported manufactured [#permalink] New post 28 Aug 2013, 23:12
1
This post received
KUDOS
jaituteja wrote:
pqhai wrote:
jaituteja wrote:
Hi pqhai,

Can you help me with this one.

country-x-imposes-heavy-tariffs-on-imported-manufactured-87003-20.html

I am confused b/w A,C and E.


Hi Jai

I'm happy to help.

ANALYZE THE ARGUMENT:

Fact: Country X imposes heavy tariffs on imported manufactured goods.
Conclusion: 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.

KEY words: “profits the long term”. If Y wants to make profits in the long term, it MUST be able to sell its products. If Y can't sell its products, the strategy will fail.

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

ANALYZE EACH ANSWER:

Company Y will be able to obtain all the necessary permits to open a factory in Country X.
Wrong. Obtain all permits does NOT guarantee that Y can sell products and have long term profits. Selling products does not depend on acquiring permits ONLY.

Company Y currently produces no goods outside its home country.
Wrong. It’s fact. B cannot be the assumption. Clearly, fact is not an assumption.

A sustainable market for Company Y's goods currently exists in Country X.
Correct. Key word is “sustainable market”. C means customers in country X are willing to buy Y’s goods for long term. That is the key for Y’s dermination to be true.

Company Y's home country does not impose tariffs on imported goods.
Wrong. Out of scope. The argument does not talk about the tariff policies in country Y.

Labor costs in Country X are lower than those in Company Y's home country.
Wrong. Quite Tempting. Labor costs is just one of many costs involving the manufacturing process. What if labor costs are lower in Country X, but other costs such as rent, electricity, insurances, etc… are higher than those in Country Y. Thus cost of good sold of Y’s goods is high, making prices for Y’s good not competitive.

Hope it helps.


Hi pqhai,

What if i say that a sustainable market is necessary, but if the company X is not able to produce goods due to higher restriction, would there be any production.

For E,
Profits= Revenue - Expense,
Not if Labor cost in X is < Labor cost in Y,
then profits will increase.

I agree that sustainable market should be there to sell goods, but to sell good one needs to produce them first.

Our motive is to increase profitability......
Goods produced ---> Good sold ----> profitability increased

For C, if i say that amount saved from non-importing is less than the increase in cost of raw materials/rent/expenses while switching to country X, so even if sustainable market is there, the profitability will decrease in that case..


Thanks,
Jai


Hi Jai

C: A sustainable market for Company Y's goods currently exists in Country X.
You can see the blue part. It means company Y has been able to produce goods and sell them in Country X already. That's the base for the success of Y in the future.

E: You have a common fallacy in reasoning. You assume labor is the only factor --OR-- the main factor of Y's total costs. What if labor cost decreases, but other costs increase (rent, insurance, legal fees, electricity...). You can't say labor cost decreases = Y's cost of good sold decreases too.
Formula: Profit = Revenue - Labor costs - Material costs - Rent - Other costs.
==> Only labor costs decreases does NOT guarantee total cost decrease.

Hope it helps.
_________________

Please +1 KUDO if my post helps. Thank you.

"Designing cars consumes you; it has a hold on your spirit which is incredibly powerful. It's not something you can do part time, you have do it with all your heart and soul or you're going to get it wrong."

Chris Bangle - Former BMV Chief of Design.

Manager
Manager
avatar
Joined: 21 Aug 2012
Posts: 150
Followers: 2

Kudos [?]: 32 [0], given: 41

Re: Country X imposes heavy tariffs on imported manufactured [#permalink] New post 28 Aug 2013, 23:26
Hi,

Got your point..!!

Thanks,


Can you enlighten on A.
If the company X has restriction to product goods, then A should be an assumption.

Thanks,
Jai
_________________

MODULUS Concept ---> inequalities-158054.html#p1257636
HEXAGON Theory ---> hexagon-theory-tips-to-solve-any-heaxgon-question-158189.html#p1258308

3 KUDOS received
Verbal Forum Moderator
Verbal Forum Moderator
User avatar
Joined: 15 Jun 2012
Posts: 992
Location: United States
Followers: 112

Kudos [?]: 1094 [3] , given: 118

Re: Country X imposes heavy tariffs on imported manufactured [#permalink] New post 28 Aug 2013, 23:45
3
This post received
KUDOS
jaituteja wrote:
Hi,

Got your point..!!

Thanks,


Can you enlighten on A.
If the company X has restriction to product goods, then A should be an assumption.

Thanks,
Jai


Good question Jai.
A is a very classical "necessary condition". But it is NOT a sufficient condition.

Okay, I will rewrite a definition of an assumption: "An assumption is a hidden statement that MUST be true for a conclusion to be true". It means if the assumption happens, the conclusion MUST be correct. If the assumption happens, but the conclusion MAY/ MAY NOT be correct. That assumption is wrong.

Conclusion: Y could increase its profits in the long term by opening a factory in Country X.

Let assume, Country X has some restrictions that make Y more difficult to get permit But Y still get permit. Is it enough for Y to earn profits in the long term? Nope. Because there are many other factors affecting the selling of Y. So "getting a permit" is only a necessary condition. It does not guarantee the conclusion WILL be true. Thus, A cannot be the correct assumption.

Hope it's clear.
_________________

Please +1 KUDO if my post helps. Thank you.

"Designing cars consumes you; it has a hold on your spirit which is incredibly powerful. It's not something you can do part time, you have do it with all your heart and soul or you're going to get it wrong."

Chris Bangle - Former BMV Chief of Design.

Intern
Intern
avatar
Joined: 27 Jun 2013
Posts: 1
Followers: 0

Kudos [?]: 0 [0], given: 1

CAT Tests
Re: Country X imposes heavy tariffs on imported manufactured [#permalink] New post 18 Sep 2013, 07:37
C is definitely correct.. No doubt in that.
Manager
Manager
avatar
Joined: 02 Apr 2013
Posts: 50
Followers: 0

Kudos [?]: 1 [0], given: 26

Re: Country X imposes heavy tariffs on imported manufactured [#permalink] New post 19 Sep 2013, 23:01
I was stuck between answers (C) and (E). I ended up choosing (C) simply because a healthy market is important for a long term investment. Although I could see how (E) could be important for long term profits as well. Kind of tricky.
Intern
Intern
avatar
Joined: 04 Dec 2012
Posts: 8
Schools: ISB '15
Followers: 1

Kudos [?]: 0 [0], given: 7

Re: country X and country Y [#permalink] New post 21 Sep 2013, 22:10
ISBtarget wrote:
lagomez wrote:
ISBtarget wrote:
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?

Company Y will be able to obtain all the necessary permits to open a factory in Country X.
Company Y currently produces no goods outside its home country.
A sustainable market for Company Y's goods currently exists in Country X.

Company Y's home country does not impose tariffs on imported goods.
Labor costs in Country X are lower than those in Company Y's home country.


i chose the last option while the OA is 3rd option.

The question stem says that country Y is planning to shift the company to country y and the company is currently produces goods for sale in country X.Which means the company already have a market for its product in country X.

Also for the 5th options, the OA explanation is that the labour cost is less than the tariff , from where did they make this assumption?

could some one please explain


the company has determined that it could increase profits by opening a factory in X. It can be assumed that the company has done it's due diligence, analyzing all costs before determining whether to open the factory in X. For the plan to work, there must be a market. One can assume labor costs have already been factored into the determination of the opening of the factory. A company would have already analyzed that the tariffs are more than the labor costs.

I am over-analyzing the question and assuming too much, which also leads me to believe I'm bringing extraneous information into the question thereby complicating the matter. However, with C, this is not the case.


The question stem says company is already producing the products for sale in country X which implies that there is already a market. if this is an implication from the question itself why would we assume that the labour cost is less than the tariff with no clue or information from the question


Awesome, I completely missed this one out...
Re: country X and country Y   [#permalink] 21 Sep 2013, 22:10
    Similar topics Author Replies Last post
Similar
Topics:
14 Experts publish their posts in the topic Last year, the government of country A imposed large tariffs JusTLucK04 10 01 Apr 2014, 11:55
18 Tariffs on imported manufactured goods nifoui 30 07 Feb 2010, 10:13
Country X imposes heavy tariffs on imported manufactured mojorising800 16 20 Jan 2010, 13:39
Country X imposes heavy tariffs on imported manufactured noboru 14 01 Aug 2009, 12:59
Country X complains that Country Y*s high tariffs on perfectstranger 29 21 Jul 2008, 04:32
Display posts from previous: Sort by

Country X imposes heavy tariffs on imported manufactured

  Question banks Downloads My Bookmarks Reviews Important topics  

Go to page   Previous    1   2   [ 30 posts ] 



GMAT Club MBA Forum Home| About| Privacy Policy| Terms and Conditions| GMAT Club Rules| Contact| Sitemap

Powered by phpBB © phpBB Group and phpBB SEO

Kindly note that the GMAT® test is a registered trademark of the Graduate Management Admission Council®, and this site has neither been reviewed nor endorsed by GMAC®.