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Prohibitively high tariffs on salmon from Winterland allow

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Prohibitively high tariffs on salmon from Winterland allow [#permalink] New post 17 Sep 2012, 05:50
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Prohibitively high tariffs on salmon from Winterland allow companies in the Republic of Osum to sell salmon without any foreign competition. Some economists believe that the tariffs partly explain why Osum salmon costs one dollar more than Winterland’s salmon. If the government removed the tariffs, consumers would either purchase more Winterland salmon than they would Osum salmon or else Osum companies would have to reduce the price of their salmon.

The conclusion reached in the last sentence depends upon which of the following assumptions?

A. The legislature of Osum proposes tariffs and the Prime Minister ratifies them.
B. Winterland has passed a countervailing tariff against salmon from the Republic of Osum.
C. A constitutional amendment is not needed to remove the tariffs.
D. Although the Republic of Osum has lower tariffs on salmon from other countries besides Winterland, these tariffs are just as effective in eliminating all salmon imports.
E. Osum salmon is not over one dollar better in quality than is Winterland salmon.
[Reveal] Spoiler: OA

Last edited by Daeny on 17 Sep 2012, 21:14, edited 1 time in total.
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Re: Prohibitively high tariffs on salmon from Winterland allow [#permalink] New post 17 Sep 2012, 11:51
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This argument depends on the assumption that if there are no tariffs and Osum salmon costs more than Winterland one, Winterland salmon would win favour of consumers. Although Osum salmon is more expensive, consumers may still buy it if it has better quality. Therefore we should expect that Osum salmon higher price cannot be explained by it better quality.
A. There's nothing to do with the proposal of tariffs. INCORRECT
B. Tariffs against Osum salmon only affect Winterland market. INCORRECT
C. The requirement to remove the tariffs is out of scope.
D. Not relevant.
E. CORRECT. As stated above, if Osum salmon is not over one dollar better in quality than is Winterland salmon, there's no reason for consumers to waste money.
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Last edited by doraemonbeo on 18 Sep 2012, 04:35, edited 1 time in total.
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Re: Prohibitively high tariffs on salmon from Winterland allow [#permalink] New post 17 Sep 2012, 21:13
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@Whatup780 I think even if C is wrong, it won't affect how consumers would react when tariffs were removed.
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Re: Prohibitively high tariffs on salmon from Winterland allow [#permalink] New post 18 Sep 2012, 02:00
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+1 E

Premise - Prohibitively high tariffs on salmon from Winterland allow companies in the Republic of Osum to sell salmon without any foreign competition. Some economists believe that the tariffs partly explain why Osum salmon costs one dollar more than Winterland’s salmon

Conclusion - If the government removed the tariffs, consumers would either purchase more Winterland salmon than they would Osum salmon or else Osum companies would have to reduce the price of their salmon.

We need to find the assumption on which the conclusion is based. Osum salmon is costlier than Winterland's but still people can buy osum' salmon if it is better in quality than winterland's salmon, but here we are concluding that people won't buy osum's salmon suggesting that it is not as good as winterland's in quality

Option E tis our answer
:-D
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Re: Prohibitively high tariffs on salmon from Winterland allow [#permalink] New post 20 Sep 2012, 01:12
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+1 E

Let's say the price in Winterland is $4 and tariff is $1 --> the last price that consumers have to pay is $5 while the price in Osum is $5 with no tariff.

=> The price in Osum is actually $1 higher than in Winterland due to the tariff.

Now tariff gone, price in Winterland is $4 vs $5 in Osum

=> Conclusion: either consumers will buy more salmon in Winterland ( because it's $1 cheaper ) or companies in Osum have to reduce price (to compete with companies in Winterland)

But what if comsumers still willing to pay higher price to buy salmon in Osum because of better quality? So choice E states that this difference in quality is not worth more than $1, which means consumers may afford only $0.5 for that better quality. So Either they buy $4-Winterland or $4.5-Osum, not $5.

=> This leads to the conclusion
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Re: Prohibitively high tariffs on salmon from Winterland allow [#permalink] New post 17 Sep 2012, 19:46
@doraemonbeo : Doesn't the option E say that the Osum salmon is not better in quality than Winterland? Assuming the tariffs are removed people would get Winterland's salmon because it is $1 cheaper & same quality as Osum's salmon.

IMO it is C.
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Re: Prohibitively high tariffs on salmon from Winterland allow [#permalink] New post 17 Sep 2012, 20:58
+1 E , if the osum salmon is not a dollar better in quality than the winterland's , there is no reason for people to keep buying the Osum's low quality salmon unless the prices for Osum salmon is drastically reduced.
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Re: Prohibitively high tariffs on salmon from Winterland allow [#permalink] New post 06 Jan 2014, 01:12
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Re: Prohibitively high tariffs on salmon from Winterland allow [#permalink] New post 06 Jan 2014, 11:03
Daeny wrote:
Prohibitively high tariffs on salmon from Winterland allow companies in the Republic of Osum to sell salmon without any foreign competition. Some economists believe that the tariffs partly explain why Osum salmon costs one dollar more than Winterland’s salmon. If the government removed the tariffs, consumers would either purchase more Winterland salmon than they would Osum salmon or else Osum companies would have to reduce the price of their salmon.


Republic of Osum - Prohibitively High tariff on salmon from Winterland allows the country to seel without foreign competition.

Economist - Osum salmon > Winterland’s salmon. { Due to tariff }

If government removes tariff there will be 2 option available for Osum companies -

(1) Osum companies would have to reduce the price

(2) Consumers would either purchase more Winterland salmon

The conclusion reached in the last sentence depends upon which of the following assumptions?

A. The legislature of Osum proposes tariffs and the Prime Minister ratifies them.

Out of scope...

B. Winterland has passed a countervailing tariff against salmon from the Republic of Osum.

Not relevant.

C. A constitutional amendment is not needed to remove the tariffs.

Out of scope.

D. Although the Republic of Osum has lower tariffs on salmon from other countries besides Winterland, these tariffs are just as effective in eliminating all salmon imports.

True , but we don't have sufficient data to claim " all salmon imports. "...

E. Osum salmon is not over one dollar better in quality than is Winterland salmon.

Possible...

The passage mentions2 option available for Osum companies to retain their sales / profit level...
Re: Prohibitively high tariffs on salmon from Winterland allow   [#permalink] 06 Jan 2014, 11:03
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