Country X imposes heavy tariffs on imported manufactured : GMAT Critical Reasoning (CR)
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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]

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20 Jan 2010, 13:39
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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.
[Reveal] Spoiler:
C

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Last edited by mojorising800 on 21 Jan 2010, 09:49, edited 1 time in total.
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Re: Country X imposes heavy tariffs [#permalink]

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20 Jan 2010, 13:51
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. - Irrelevant. The conclusion talks about increasing profits and hence this statement doesn't help

B.Company Y currently produces no goods outside its home country. - Irrelevant

C.A sustainable market for Company Y’s goods currently exists in Country X. - The stem stays in the long runn. Hence currently existing is hardly anything to bother.

D.Company Y’s home country does not impose tariffs on imported goods. - Imported goods in Company Y's home country is not the point of discussion

E.Labor costs in Country X are lower than those in Company Y’s home country. - Correct. For the determination of Country Y to be true, this should be true. Else you cannot achieve increased profits

IMO... E
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Re: Country X imposes heavy tariffs [#permalink]

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20 Jan 2010, 14:42
I think that the key here is in the words "...it could increase its profits in the long term...".

A) The statement is hypotetical, therefore it does not require certainty in terms of viability
B) Out of scope. The passage concerns only Country X, the home country of Company Y and Company Y
C) In order to increase profits IN THE LONG TERM, the internal market of Country X cannot collapse. Hence C is my pick.
D) Out of scope. Company Y is considering the production of goods to be sold in Country Y, not back home. The passage does not suggest that Company Y would be relocating in Country X, just that it will open a factory there.
E) If labor costs are equal in the two countries, Company Y would still benefit from avoiding import taxes, hence E is unnecessary.
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Re: Country X imposes heavy tariffs [#permalink]

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20 Jan 2010, 15:17
My answer is C. Company Y's aim is to increase profit in long terms.
It can do so if and only if it has got sustainable market in country X.

E is incorrect since argument doesn't mention anything about the labor cost.

What's the OA?
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Re: Country X imposes heavy tariffs [#permalink]

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21 Jan 2010, 09:33
Option E.If high labor costs offset the gains made by avoiding import duties,there is no real benefit.
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Re: Country X imposes heavy tariffs [#permalink]

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21 Jan 2010, 09:57
IMO C ; if there is no market for goods produced in a factory, there will be no profit
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Re: Country X imposes heavy tariffs [#permalink]

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06 Feb 2010, 08:20
I do not agree with the OA if it is C. C is already stated in the passage.

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.

Company Y does already has a market in country X and it is planning to increase the profit. Therefore, C is already in the passage.

I think answer must be A. Let's negate A.....

A - Company Y will be able to obtain all the necessary permits to open a factory in Country X.

Negate A - Company Y will not be able to obtain all the necessary permits to open a factory in Country X.

If Y didn't able to get all necessary permits then it may open and may not open the factory in X. Conclusion fails apart and therefore, A must be the answer.

Please correct me if I am wrong.

What is the source of the answer and what is the OE?
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Re: Country X imposes heavy tariffs [#permalink]

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06 Feb 2010, 10:50
IMO --- C
Current scenario :

Comapny Y is currently making profit when goods are imported and sold in country X . Since the import duties/tarifffs are very high, profit of company Y is low. So inorder to avoid import duties it plan to localize the manufacturing process.....but with the assumption that labour cost shouldnt offset the benefit derived from saving import duties.

sustainability is out of scope of the stem ......(however in the long run is does mentioned but main point of the stem is about increasing profit)
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Re: Country X imposes heavy tariffs [#permalink]

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09 Feb 2010, 07:21

E is not an answer: low labor cost alone would not guarantee low production cost. What if raw material is more expensive because of a duty/tax/high demand.

A is not an answer: it is very basic requirement and true, but maybe the company does not need a permit for inside production. I eliminated it because it did not fit in with the 'increase its profits in the long term' part.
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Re: Country X imposes heavy tariffs on imported manufactured [#permalink]

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04 Mar 2012, 20:12
Hi,

Could someone tell the answer for this and also explain it,

Thanks

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Re: Country X imposes heavy tariffs on imported manufactured [#permalink]

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04 Mar 2012, 23:08
profit = sales - cost

cost has many component out of which 1 is mentioned in stimulus (import tariff ). thus any valid assumption here could be sales price would remain as high as previously . any other factors that would come under cost (like price of raw materials, machinery labor )would remain same or get lowered in country X .

Option E mention abt cost of labor and hence seems like a valid choice
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Re: Country X imposes heavy tariffs on imported manufactured [#permalink]

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04 Mar 2012, 23:15
after going thru the explanation choice A seems like correct option. Negating both A and E

Negating A Company Y will NOT be able to obtain all the necessary permits to open a factory in Country X. thus conclusion abt increased profit falls apart.

Negating E Labor costs in Country X are NOT lower than those in Company Y’s home country. Even if they are same in two countries, profit in setting facotry in country X could still result in higher profit due to saving on import tariff. hence conclusin can still be correct.
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Re: Country X imposes heavy tariffs on imported manufactured [#permalink]

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05 Mar 2012, 00:13
I think the correct answer is C because if there is no sustainable market for Company Y’s goods currently existing in Country X the company's determination to increase profits is impossible to achieve.
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Re: Country X imposes heavy tariffs on imported manufactured [#permalink]

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05 Mar 2012, 00:19
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.

Between C and E its a clear E. The reason is the C is not even an assumption, its a fact stated in the stimulus. "the goods that it currently produces in its home country for sale in Country X. "
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Re: Country X imposes heavy tariffs [#permalink]

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07 Mar 2012, 00:52
I do not agree with the OA if it is C. C is already stated in the passage.

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.

Company Y does already has a market in country X and it is planning to increase the profit. Therefore, C is already in the passage.

I think answer must be A. Let's negate A.....

A - Company Y will be able to obtain all the necessary permits to open a factory in Country X.

Negate A - Company Y will not be able to obtain all the necessary permits to open a factory in Country X.

If Y didn't able to get all necessary permits then it may open and may not open the factory in X. Conclusion fails apart and therefore, A must be the answer.

Please correct me if I am wrong.

What is the source of the answer and what is the OE?

completely agree with that post
please explaine what is wrong with that reasoning?
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Re: Country X imposes heavy tariffs on imported manufactured [#permalink]

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18 Mar 2012, 04:34
IMO E.

If the labor cost in country X is more than Y's country then this it will weaken the conclusion.

i think C would be right if it would have stated
"A sustainable market for Company Y’s goods WILL exists in Country X."

Correct me if i m wrong.

thanks
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Re: Country X imposes heavy tariffs on imported manufactured [#permalink]

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18 Mar 2012, 21:31
IMO E.

If the labor cost in country X is more than Y's country then this it will weaken the conclusion.

i think C would be right if it would have stated
"A sustainable market for Company Y’s goods WILL exists in Country X."

Correct me if i m wrong.

thanks

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?

C.A sustainable market for Company Y’s goods currently exists in Country X.
E.Labor costs in Country X are lower than those in Company Y’s home country.

C is correct.
negate E. --> Labor costs in Country X are not lower than those in Company Y’s home country.
okay now this thing doesnt alters the conclusion. suppose the inflated tariffs that Y had to pay=200
labor cost in Y=50
labor cost in X=60
THEN also Y is in profit and its conclusion stands of increased profit.

hence for this case the negated assumption doesnt alters the conclusion. Also by argument we cant deduce anything regarding the labor cost and increased tariff, hence E is basically does nothing to the conclusion.

hope this helps..!!
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Re: Country X imposes heavy tariffs on imported manufactured   [#permalink] 18 Mar 2012, 21:31
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