Tariffs on imported manufactured goods : GMAT Critical Reasoning (CR)
Check GMAT Club Decision Tracker for the Latest School Decision Releases http://gmatclub.com/AppTrack

 It is currently 24 Jan 2017, 07:45

STARTING SOON:

How to Get Off the MBA Waitlist: YouTube Live with Personal MBA Coach  |  Click Here to Join the Session

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

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

Events & Promotions

Events & Promotions in June
Open Detailed Calendar

Tariffs on imported manufactured goods

Author Message
TAGS:

Hide Tags

Manager
Joined: 04 May 2009
Posts: 130
Location: London
Schools: Haas (WL), Kellogg (matricultating), Stanford (R2, ding), Columbia (ding)
WE 1: 3 years hotel industry sales and marketing France
WE 2: 3 years financial industry marketing UK
Followers: 3

Kudos [?]: 49 [3] , given: 10

Tariffs on imported manufactured goods [#permalink]

Show Tags

07 Feb 2010, 10:13
3
KUDOS
11
This post was
BOOKMARKED
00:00

Difficulty:

15% (low)

Question Stats:

78% (02:06) correct 22% (01:29) wrong based on 648 sessions

HideShow timer Statistics

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.

The answer to the question is C, with this explanation from MGMAT:
In order for Company Y to conclude that it can increase long-term profits by opening a factory in Country X, it must believe that a sustainable market exists for its products in that country. Otherwise, the new factory would not generate revenue and the company could not recoup the cost of the new factory.

What I don't get: how can C be right because the passage states that company Y currently produces goodsfor sale in country X.... so we know that there is a market for comany Y in country X, no?

What am I missing?
[Reveal] Spoiler: OA

_________________

Yes I can!

Last edited by Keats on 10 Nov 2016, 11:15, edited 1 time in total.
If you have any questions
New!
Senior Manager
Joined: 24 Jul 2009
Posts: 297
Followers: 3

Kudos [?]: 131 [0], given: 0

Re: Tariffs on imported manufactured goods [#permalink]

Show Tags

08 Feb 2010, 07:21
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.

The answer to the question is C, with this explanation from MGMAT:
In order for Company Y to conclude that it can increase long-term profits by opening a factory in Country X, it must believe that a sustainable market exists for its products in that country. Otherwise, the new factory would not generate revenue and the company could not recoup the cost of the new factory.

What I don't get: how can C be right because the passage states that company Y currently produces goodsfor sale in country X.... so we know that there is a market for comany Y in country X, no?

What am I missing?

IMO its A.

C talks about the current situation. No information is there about the long term demands.
Also if we negate A, the argument falls apart.
Manager
Joined: 04 May 2009
Posts: 130
Location: London
Schools: Haas (WL), Kellogg (matricultating), Stanford (R2, ding), Columbia (ding)
WE 1: 3 years hotel industry sales and marketing France
WE 2: 3 years financial industry marketing UK
Followers: 3

Kudos [?]: 49 [0], given: 10

Re: Tariffs on imported manufactured goods [#permalink]

Show Tags

08 Feb 2010, 14:19
I know, I replied A too, but the real answer is C...
_________________

Yes I can!

Manager
Joined: 05 Dec 2009
Posts: 127
Followers: 2

Kudos [?]: 87 [0], given: 0

Re: Tariffs on imported manufactured goods [#permalink]

Show Tags

08 Feb 2010, 19:17
Read the 2nd statement carefully, "Company Y has determined that it could increase its profits in the long term"....To be successful in its planning, Company Y is assuming that the demand of the product will continue in future.

Rest of the assumptions as in A and labor costs in other choice will come next.
Manhattan GMAT Instructor
Affiliations: ManhattanGMAT
Joined: 21 Jan 2010
Posts: 354
Location: San Francisco
Followers: 497

Kudos [?]: 1317 [10] , given: 11

Re: Tariffs on imported manufactured goods [#permalink]

Show Tags

09 Feb 2010, 18:04
10
KUDOS
2
This post was
BOOKMARKED
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!
_________________

Tommy Wallach | Manhattan GMAT Instructor | San Francisco

Manhattan GMAT Discount | Manhattan GMAT Reviews

Senior Manager
Joined: 24 Jul 2009
Posts: 297
Followers: 3

Kudos [?]: 131 [0], given: 0

Re: Tariffs on imported manufactured goods [#permalink]

Show Tags

10 Feb 2010, 02:16
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!

If we see the question stem, we have been asked "For Company Y's determination to be true, which of the following assumptions must also be true".
whether the determination only includes making profits...??
What i understand the determinations starts "from building up a factory........ to profit generation".

Also "C" only talks about the "current" market condition, it doesn't forecast the market conditions in future.And Company is looking for long term profits....NOT current profits.

IMO A is better than C.
Manhattan GMAT Instructor
Affiliations: ManhattanGMAT
Joined: 21 Jan 2010
Posts: 354
Location: San Francisco
Followers: 497

Kudos [?]: 1317 [7] , given: 11

Re: Tariffs on imported manufactured goods [#permalink]

Show Tags

10 Feb 2010, 10:24
7
KUDOS
Hey Nverma,

It's a tough question, but the answer is definitely C. You have to stay REALLY close to what's written.

The passage says that the company has concluded it COULD increase profits by OPENING a factory. So the issue isn't whether it is possible to open a factory, but whether IF THE FACTORY WERE OPENED, it would make a profit.

Answer choice A tells us that it will be difficult to open the factory, but that is unrelated to the conclusion. We're only interested in whether or not an OPEN FACTORY would be profitable. There is no need to differentiate between long-term and short-term profits, or between present and future profits. This is about a hypothetical situation in which the factory is open. Only C relates to this.

Hope that helps!
_________________

Tommy Wallach | Manhattan GMAT Instructor | San Francisco

Manhattan GMAT Discount | Manhattan GMAT Reviews

Intern
Joined: 01 Feb 2010
Posts: 33
Followers: 1

Kudos [?]: 20 [2] , given: 12

Re: Tariffs on imported manufactured goods [#permalink]

Show Tags

14 Feb 2010, 13:32
2
KUDOS
nifoui wrote:
The answer to the question is C, with this explanation from MGMAT:
In order for Company Y to conclude that it can increase long-term profits by opening a factory in Country X, it must believe that a sustainable market exists for its products in that country. Otherwise, the new factory would not generate revenue and the company could not recoup the cost of the new factory.

What I don't get: how can C be right because the passage states that company Y currently produces goodsfor sale in country X.... so we know that there is a market for comany Y in country X, no?

What am I missing?

Don't miss the word 'sustainable'. Country X is selling its products today means that its products have a market today. That doesn't ensure that the products will have market tomorrow also. It's whole plan is based on long term gains. What use id it of if it opens a factory today & has a market today but 2 years down the line it realizes that its market has ceased to exist.

A & E are lucrative options but out of the scope of the problem.
Manager
Joined: 24 Jan 2010
Posts: 164
Location: India
Schools: ISB
Followers: 2

Kudos [?]: 53 [0], given: 14

Re: Tariffs on imported manufactured goods [#permalink]

Show Tags

09 Jul 2010, 01:06
Even I got A ......
_________________

_________________
If you like my post, consider giving me a kudos. THANKS!

Manager
Joined: 24 Aug 2008
Posts: 230
Location: India
WE 1: 3.75 IT
WE 2: 1.0 IT
Followers: 2

Kudos [?]: 60 [0], given: 5

Re: Tariffs on imported manufactured goods [#permalink]

Show Tags

09 Jul 2010, 01:27
I agree with Tommy Wallach and honeyrai.
_________________

Cheers,
Varun

If you like my post, give me KUDOS!!

Senior Manager
Joined: 23 May 2010
Posts: 441
Followers: 5

Kudos [?]: 103 [0], given: 112

Re: Tariffs on imported manufactured goods [#permalink]

Show Tags

23 Jul 2010, 09:55
wow !! i am glad that I marked C ..and agree with Honeyrai. The key word for me is sustainable..

regards
Manager
Joined: 08 Jan 2010
Posts: 194
Followers: 1

Kudos [?]: 3 [0], given: 13

Re: Tariffs on imported manufactured goods [#permalink]

Show Tags

28 Jul 2010, 20:41
I was tempted by A .......but persisted with C ...........don't know if its all my merit because i have seen C already below accidentally ....
Manager
Joined: 08 Jan 2010
Posts: 194
Followers: 1

Kudos [?]: 3 [0], given: 13

Re: Tariffs on imported manufactured goods [#permalink]

Show Tags

28 Jul 2010, 20:41
But .I agree with the explanations above ...........C is much better than A ......
Senior Manager
Affiliations: Volunteer Operation Smile India, Creative Head of College IEEE branch (2009-10), Chief Editor College Magazine (2009), Finance Head College Magazine (2008)
Joined: 25 Jul 2010
Posts: 471
Location: India
WE2: Entrepreneur (E-commerce - The Laptop Skin Vault)
Concentration: Marketing, Entrepreneurship
GMAT 1: 710 Q49 V38
WE: Marketing (Other)
Followers: 13

Kudos [?]: 145 [0], given: 24

Re: Tariffs on imported manufactured goods [#permalink]

Show Tags

12 Sep 2010, 05:07
Its clearly C...If no sustainable market in X no point in opening a plant to sell goods in X
_________________

Kidchaos

http://www.laptopskinvault.com

Follow The Laptop Skin Vault on:

Consider Kudos if you think the Post is good
Unless someone like you cares a whole awful lot. Nothing is going to change. It's not. - Dr. Seuss

Manager
Joined: 22 Jul 2010
Posts: 138
Followers: 1

Kudos [?]: 10 [0], given: 13

Re: Tariffs on imported manufactured goods [#permalink]

Show Tags

12 Sep 2010, 06:52
1
This post was
BOOKMARKED
well i willl go for C in one reading only..

I think if one company doest have sustainable market in some country whats the use in getting all permits cleared and cheap labour cost....

Infact it might be a dead investment..........

C...............:D
_________________

Whatever you do, Do it SINCERELY!!!

GOD help those who help themselves....

Manager
Joined: 02 Jan 2010
Posts: 135
Followers: 4

Kudos [?]: 5 [0], given: 3

Re: Tariffs on imported manufactured goods [#permalink]

Show Tags

13 Sep 2010, 01:36
I went with C too
_________________

Regards
Ganesh
Class of 2012
Great Lakes Institute of Management
http://greatlakes.edu.in

Intern
Joined: 17 May 2012
Posts: 17
Followers: 0

Kudos [?]: 0 [0], given: 2

Re: Tariffs on imported manufactured goods [#permalink]

Show Tags

07 Jun 2012, 03:23
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.
BSchool Forum Moderator
Status: Flying over the cloud!
Joined: 16 Aug 2011
Posts: 912
Location: Viet Nam
GMAT Date: 06-06-2014
GPA: 3.07
Followers: 73

Kudos [?]: 603 [0], given: 44

Re: Tariffs on imported manufactured goods [#permalink]

Show Tags

07 Jun 2012, 20:48
This is tempting and tricky question. Between choice A and C. The word "could" make long-term profit is the most important word to decide which choice is correct. Choice A states that Y will be able (not could)....

Choice C states the sustainable market ensure the long-term profit of producing goods in X as the conclusion of the passage stated.
_________________

Rules for posting in verbal gmat forum, read it before posting anything in verbal forum
Giving me + 1 kudos if my post is valuable with you

The more you like my post, the more you share to other's need

CR: Focus of the Week: Must be True Question

Manager
Joined: 02 Jan 2011
Posts: 201
Followers: 1

Kudos [?]: 52 [0], given: 22

Re: Tariffs on imported manufactured goods [#permalink]

Show Tags

08 Jun 2012, 02:20
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.

The answer to the question is C, with this explanation from MGMAT:
In order for Company Y to conclude that it can increase long-term profits by opening a factory in Country X, it must believe that a sustainable market exists for its products in that country. Otherwise, the new factory would not generate revenue and the company could not recoup the cost of the new factory.

What I don't get: how can C be right because the passage states that company Y currently produces goodsfor sale in country X.... so we know that there is a market for comany Y in country X, no?

What am I missing?

If company Y exports goods to country X, due to the increased impose of tariffs on imported goods from Country X's side, the over all profit margin would decrease for Company Y if it continues to do so. Hence Company Y has decided to set up its plant in Country X.

A: Company Y will be able to obtain all the necessary permits to open a factory in Country X. - Out of scope of the current context - Incorrect
B: Company Y currently produces no goods outside its home country. - It is irrelevant to the conclusion made in the passage - Incorrect
C: A sustainable market for Company Y's goods currently exists in Country X. - The move of Company Y to set up a plant in Country X is justifiable only when there is a considerable market in Country X for its product - Correct
D: Company Y's home country does not impose tariffs on imported goods. - The passage talks about Country X rather than the home country of Company Y - Irrelevant - Incorrect
E: Labor costs in Country X are lower than those in Company Y's home country. - The point of discussion is not about the labour costs - Out of scope - Incorrect
Manager
Affiliations: Project Management Professional (PMP)
Joined: 30 Jun 2011
Posts: 213
Location: New Delhi, India
Followers: 5

Kudos [?]: 67 [0], given: 12

Re: Tariffs on imported manufactured goods [#permalink]

Show Tags

12 Jun 2012, 05:44
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..
_________________

Best
Vaibhav

If you found my contribution helpful, please click the +1 Kudos button on the left, Thanks

Re: Tariffs on imported manufactured goods   [#permalink] 12 Jun 2012, 05:44

Go to page    1   2   3    Next  [ 42 posts ]

Similar topics Replies Last post
Similar
Topics:
1 Recent moves to lower the tariff on Spring lamb imported 15 31 Jul 2011, 12:00
Country X imposes heavy tariffs on imported manufactured 16 20 Jan 2010, 13:39
19 Country X imposes heavy tariffs on imported manufactured 37 17 Nov 2009, 19:32
Country X imposes heavy tariffs on imported manufactured 14 01 Aug 2009, 12:59
Kernland imposes a high tariff on the export of unprocessed 6 15 Jun 2008, 17:35
Display posts from previous: Sort by