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Tariffs on imported manufactured goods

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Re: Tariffs on imported manufactured goods [#permalink] New post 18 Jan 2013, 22:06
heavy tariff on imported goods to Country Y is cost...
manufacture in Country Y will increase profit...

(B) is irrelevant to the profit increase...
(D) attempts to reverse the situation... tariff on Country Y for imported goods is another story...

To increase profits: decrease cost, increase market/sales
(E) and (C) seem to be relevant to increase in profits BUT Labor Cost will need us to assume more than what is given...

(C) on the other hand, is about having a market which is a basic requirement to making sales...
If there is no market, how can profit increase?

Answer: C

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Re: Tariffs on imported manufactured goods [#permalink] New post 17 Feb 2013, 21:21
nifoui wrote:
Here is a 700-800 level question from MGMAT:

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.


Overhead cost for Coun Y is "Heavy tariffs" => Coun Y decides to open the factory in CounX to avoid tariffs

C:COULD increase profit in long term.

GAP:There is demand for the goods by Coun Y.

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Re: Tariffs on imported manufactured goods [#permalink] New post 10 Mar 2013, 10:52
can someone please explain if we can consider something, which already exists in the premise, as assumption....Here in this case we already know that the market for the goods exist from the very fact that the country Y intends to shift the manufacturing facility to country X for products it has already been producing in country Y and selling in country X
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Re: Tariffs on imported manufactured goods [#permalink] New post 29 Jun 2013, 11:01
I chose E because the stimulus says that the company Y already made products for Country X so surely it must have a market there.

Please explain why my reasoning is flawed, so that I don't make a similar mistake again.
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Re: Tariffs on imported manufactured goods [#permalink] New post 20 Jul 2013, 02:08
I think answer is C mainly because of the word "Sustainability". If sustainability is not there, it could be wrong. Am i correct?
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Re: Tariffs on imported manufactured goods [#permalink] New post 20 Jul 2013, 07:31
Ravi9535 wrote:
I think answer is C mainly because of the word "Sustainability". If sustainability is not there, it could be wrong. Am i correct?


C is not correct ONLY because has that word in it, however its presence is very important.

The passage states that "Company Y has determined that it could increase its profits in the long term by (...)"

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.

If you eliminate the word from C, the answer losses strength.
NOW a market exists, but we cannot be sure that this market will be present in the future anymore (what we can infer with the word "sustainable"); so the long term profits could not be guaranteed.

Hope my point is clear

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Re: Tariffs on imported manufactured goods [#permalink] New post 20 Jul 2013, 21:03
yes C is implied in the problem stateent but it is not 1005 clear , for y to have started producing in X which is a commitment to sell only in X so it should be first c is established for moving to country x and then other economic assumptions

narangvaibhav wrote:
TommyWallach wrote:
Hey All,

This is a tough question, and since it's one of ours, I figured I had to weigh in.

Conclusion: Company Y could increase profits by putting factory in Country X
Premise: Country X has heavy tariffs on imports
Assumption: People actually buy Company Y's stuff in Country X

This is a tough question because of answer choice A. You're supposed to look at it and say "Well, if they can't even open the factory, won't that negate the conclusion?" And you'd be right, if not for one little word in the passage: could. If this passage said, Company Y WILL make a big profit next year by building a factory, then answer choice A would be correct, because that makes it impossible for them to actually build the factory.

But this passage merely says they "could" make a profit by opening the factory. In this hypothetical universe, the factory has already opened. Whether or not there are impediments to making this happen is immaterial. The issue is whether the existence of the factory will make them a profit.

A: Company Y will be able to obtain all the necessary permits to open a factory in Country X.
Problem: We don't need to know how hard it is to make the factory. The conclusion implies that the factory is already open.

B: Company Y currently produces no goods outside its home country.
Problem: This has no connection to whether or not they will make money if they DO produce goods outside the home country.

C: A sustainable market for Company Y's goods currently exists in Country X.
Answer: You can't make a profit if nobody's buying, no matter how many tariffs you dodge.

D: Company Y's home country does not impose tariffs on imported goods.
Problem: This doesn't matter, because Company Y wants to make a profit on goods sold in Country X.

E: Labor costs in Country X are lower than those in Company Y's home country.
Problem: This strengthens the argument a bit (because the factory in Country X will be cheaper, leading to potential profit), but it isn't necessary. If we take the negation ("Labor costs in Country X are NOT lower than in Country Y), the argument does not fall apart.

Hope that helps!

Thanks for the detailed explanation tommy.. :)
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Re: Tariffs on imported manufactured goods [#permalink] New post 03 Aug 2013, 01:03
Gaurav2013fall wrote:
There is one more point that nobody seemed to touched on. Company is concerned about long term profit. Answer choice C provides sustainable market to the company. Hence, long term profitability can be ensured.

All of the other answer choices are the next- steps involved in the process , C talks about "Sustainability" and that is how it equates Y's concern.
Agreed !! Thanks
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Re: Tariffs on imported manufactured goods [#permalink] New post 03 Aug 2013, 22:33
For me the key word was "long term". If the company is planning for profits in long term, it simply indicates that the formalities to set up a company and all is over. It is just to see if we can continue to make profits and the word sustainable in choice C completes the long term requirement.

For a while i was tempted by the labor cost but again the keyword long term held me back.

Hope i helped.
Thanks,
Madhu
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Re: Tariffs on imported manufactured goods [#permalink] New post 13 Jul 2014, 06:04
Can we apply the negation rules for this assumption type question?

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Re: Tariffs on imported manufactured goods [#permalink] New post 19 Jul 2014, 01:14
Tommy, the passage says "increase its profits", which means they are already making profit but that gets reduced because the company is paying a heavy tax from it too. Hence, the plan.

If the key to this passage is staying close to it, then the word "increase" cant be ignored as well.
That way C loses value.
Re: Tariffs on imported manufactured goods   [#permalink] 19 Jul 2014, 01:14
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