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To protect certain fledgling industries, the government of

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To protect certain fledgling industries, the government of [#permalink]

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New post 21 Dec 2004, 05:39
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A
B
C
D
E

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  35% (medium)

Question Stats:

70% (02:29) correct 30% (01:50) wrong based on 350 sessions

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To protect certain fledgling industries, the government of country Z banned imports of the types of products those industries were starting to make. As a direct result, the cost of those products to the buyers, several export-dependent industries in Z, went up, sharply limiting the ability of those industries to compete effectively in their export markets.

Which of the following conclusions about country Z's adversely affected export-dependent industries is best supported by the passage?
(A) Profit margins in those industries were not high enough to absorb the rise in costs mentioned above.
(B) Those industries had to contend with the fact that other countries banned imports from country Z.
(C) Those industries succeeded in expanding the domestic market for their products.
(D) Steps to offset rising materials costs by decreasing labor costs were taken in those industries.
(E) Those industries started to move into export markets that they had previously judged unprofitable.

[Reveal] Spoiler:
When the cost of the products rose, the competitive ability of those export-dependent industries that bought them was sharply limited. This fact strongly supports the claim that those industries did not have sufficiently high profit margins to enable them to absorb the price increase, so choice A is the best answer.
Given the limitation on their competitive ability, it is unlikely that those industries would be able either to expand their domestic markets (choice C) or to enter into new export markets (choice E). The other choices relate situations that would be possible but that are not strongly supported: other countries could have continued topermit imports from Z (choice B), and the industries may have unable to decrease labor costs (choice D).


What I don't understand from the explanation was how do they know for sure the profit margin is not "high"? What if the cost of product rose in other countries as well? What if the companies sell at higher price but high quality products therefore the profit margin is still as high as before? You know what I go about this!! There is no guarantee at all about profit here reguarding to the cost if we don't contribute to other factors. Therefore, this cannot be a conclusion. What do you think? This is question 95 from OG by the way.
[Reveal] Spoiler: OA
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Re: To protect certain fledgling industries, the government of [#permalink]

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New post 21 Dec 2004, 23:02
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What I don't understand from the explaination was how do they know for sure the profit margin is not "high"? What if the cost of product rose in other countries as well? What if the companies sell at higher price but high quality products therefore the profit margin is still as high as before? You know what I go about this!! There is no guarantee at all about profit here reguarding to the cost if we don't contribute to other factors. Therefore, this cannot be a conclusion. What do you think? This is question 95 from OG by the way.


Well, first of all I would say that their response is by far the BEST response of the bunch, so it's clearly the right one. You make good points, but don't argue for any of the other responses. To answer your questions...
1. it doesn't matter if the profit margins were high or not, they weren't high enough to absorb the additional costs or their ability to compete wouldn't have been affected.
2. Again, it doesn't matter if the prices rose in other countries, because the question TELLS you that the company in question had a limited ability to compete.

I think, generally, you are missing the fact that we are told that the export-dependent firm's ability to compete was severely limited. This tells you that they incurred problems due to newly expensive inputs. All of your recovery schemes allow them to not incur problems, but we already know that they did. I hope that makes sense.
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Re: To protect certain fledgling industries, the government of [#permalink]

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New post 22 Dec 2004, 05:53
Well, that makes sense better than OG. Thanks
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Re: To protect certain fledgling industries, the government of [#permalink]

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New post 05 Oct 2015, 12:04
Hello from the GMAT Club VerbalBot!

Thanks to another GMAT Club member, I have just discovered this valuable topic, yet it had no discussion for over a year. I am now bumping it up - doing my job. I think you may find it valuable (esp those replies with Kudos).

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Re: To protect certain fledgling industries, the government of   [#permalink] 05 Oct 2015, 12:04
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