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The U.S. gets 5 percent of its oil from Mexico. If Mexico

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The U.S. gets 5 percent of its oil from Mexico. If Mexico [#permalink] New post 09 Apr 2004, 13:30
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A
B
C
D
E

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36% (02:37) correct 64% (01:20) wrong based on 10 sessions
The U.S. gets 5 percent of its oil from Mexico. If Mexico raises the price of its oil by 20 percent, that will result in an increase of 1 percent (5 percent times 20 percent) in the price of oil products in the U.S.

Which of the following is an assumption upon which the above argument depends?
A) Oil prices in the U.S. are not affected by inflation in Mexico
B) Other countries will not increase oil exports to the U.S.
C) The price increase will not result in a decrease in the sales of Mexican oil products
D) People will not substitute other products for those made from Mexican oil
E) A 1 percent price increase in oil products will not be recognized by the buying public
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 [#permalink] New post 09 Apr 2004, 14:20
This is a tough one. It smells like a LSAT questions! If not, I won't
worry too much. Lot of loose ends!!

The choices are B and C.

Price stability will be reached either by reduced sales of higher priced
item or increased supply of lower priced item.

Assume that the overall demand stays the same, then one can't lower the
import from Mexico. Only way is to substitute Mexico oil for some other
country oil. So, other countries must be in a position to supply oil for
the original price.

In this scenario, the answer B makes more sense.


Assume that demand is elastic, then any increase in price results in
decresed demand. In this scenario, the highest priced supplier suffers the
most and answer C makes sense.

Well, In CR, one should not assume other than what has been stated.
Going by the rule, I don't know what to choose.

But, if one can use the external knowledge, then I would go with C.
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 [#permalink] New post 09 Apr 2004, 14:47
I think B.
The premise is that we get 5% of our oil from Mexico.
The assumption is that the percentage will remain steady and result (conclusion) in a 1% increase in price.
B half way states this assumption. Kind of..... If you negate B, it does a pretty good job of undermining the argument.
C states that the price increase will not not result in a decrease in sales. The conclusion is that the price will increase. C is an assumption that will occur after the conclusion is achieved and seems outside the scope of the argument.
Just my 2 cents. Tough question.
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 [#permalink] New post 09 Apr 2004, 17:15
Another reason why I would not choose C is because it talks about Mexican oil products. The question stem says that US imports oil, not oil products, from Mexico. Thats why C seems to be out of scope. Hence I would choose B as my answer.
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 [#permalink] New post 09 Apr 2004, 17:17
US imports only a tiny portion of its oil from Mexico. Any price increase in Mexican oil is distributed to total oil imported. Increase in Mexican oil prices will be obserbed only if the other countries compensate for the OIL if US doeas not wish to import from Mexico.
I am not sure if it is an assumption question. It should be weaken/strengthen question.

I believe B is a good bet.

Last edited by anandnk on 09 Apr 2004, 17:43, edited 1 time in total.
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 [#permalink] New post 09 Apr 2004, 17:22
I think B is better than C....

All other countries make up 95% of the oil imports...If other countries increase their exports...then the percentage of mexico decreases..and So it will not be 5%..but may be say, 4%..Then there will not be a 1% rise in price...

So B
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 [#permalink] New post 09 Apr 2004, 18:06
B it is, C is irrelevant, for it is concerned with 'sale of mexican oil products'
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 [#permalink] New post 09 Apr 2004, 18:37
This was a tough one indeed and the OA is C...
I believe the key is the nuance between oil vs oil products. To make the conclusion valid, we have to find a relationship between oil and oil products. B does not do that. Even though B is negated and other countries will increase their oil export to the U.S., this does not necessarily prove that the price of oil products cannot still increase by 1 percent.
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Last edited by Paul on 09 Apr 2004, 18:46, edited 1 time in total.
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 [#permalink] New post 09 Apr 2004, 18:45
The problem with B is that it assumes that 100% oil consumed in US is imported. US might need 100 barrels a day and 5 of them might come from MExico and 95 are from Bush-Land(Texas).

I can also talk about C saying it is talking about Mexican oil products which is out of scope.
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Re: CR: Mexican Oil [#permalink] New post 21 May 2011, 16:06
Inflation -- out of scope
B - Hold
C,D- Oil PRODUCTS
E: Irrelevant ..

B is my take ..
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Re: CR: Mexican Oil [#permalink] New post 21 May 2011, 21:25
Paul wrote:
The U.S. gets 5 percent of its oil from Mexico. If Mexico raises the price of its oil by 20 percent, that will result in an increase of 1 percent (5 percent times 20 percent) in the price of oil products in the U.S.

Which of the following is an assumption upon which the above argument depends?
A) Oil prices in the U.S. are not affected by inflation in Mexico
B) Other countries will not increase oil exports to the U.S.
C) The price increase will not result in a decrease in the sales of Mexican oil products
D) People will not substitute other products for those made from Mexican oil
E) A 1 percent price increase in oil products will not be recognized by the buying public


I believe it's C:

The formula for increase in oil price depends on two factors
Percent of Mexican oil in US oil imports
&
Increase in price of Mexican oil

We know Increase in price is definitely: 20%
But, if the sales of Mexico plummets; it would mean US is importing less oil from Mexico dropping the Mexican oil percentage in US oil export below 5; maybe 4 or even 1; who knows;

Let's say it becomes 1 i.e. Percent of mexican oil in us=1%
Thus the formula should ideally become: 20*1= 20; increasing the oil prices by only 1/5 th of a percent.

Ans: "C"
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Re: CR: Mexican Oil [#permalink] New post 24 May 2011, 22:05
choice is between C and D.
Other products is slightly beyond the scope of the argument.

C, after negating certainly crashes the hidden assumption of demand being not affected.

C is clear winner here.
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Re: CR: Mexican Oil [#permalink] New post 01 Jun 2011, 05:22
+1 C

Tough one.
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Re: CR: Mexican Oil   [#permalink] 01 Jun 2011, 05:22
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