CONFUSING INFERENCE LOGIC

PriyamRathor

About your first example:
Answer (B) is always true about any new tax, right?
(B) The new tax would produce a net gain in tax revenue for the government only if the yearly total revenue that it generates exceeds the total of any yearly tax-revenue decrease resulting from the workers' loss of jobs.

About your second example:
We know that ...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

What we know from the text:
Stated: The govt banned imports of some products
Implied, Definitely true: Anyone who wanted these products had to get them from domestic manufacturers.

Stated: The buyers of the products are several export-dependent industries.
Stated: The cost of these products to the buyers went up as a direct result of the ban.
Stated: (As a result of the import ban) These industries became less able to compete in export markets
Implied, Definitely true: These industries raised their prices.

Implied, Definitely true: (A) Profit margins in those industries were not high enough to absorb the rise in costs mentioned above.

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Your mission on these problems is to PROVE one of the answer choices from the given statements.

A couple of other things to keep in mind on these problems:

• You should have to combine two or more statements from the passage to prove your answer. This is a baseline feature of this problem type. Moreover, it has 2 immediate consequences that can help you solve these problems more efficiently:

CONSEQUENCE 1/ Knowing this functionality gives you a concrete goal for your reading: As you read, watch for pairs of statements that can be logically combined in a straightforward way.

CONSEQUENCE 2/ The correct answer should NOT just be a restatement of one statement from the passage. If an answer choice seems to just restate a single already-given statement, you should expect it to be wrong—probably by misquoting or distorting the statement that it seems to repeat.


Let's take a look at the statements in your Question #1 with the goal of finding ways to logically combine statements:


Right here, we have the ultimate purpose of all this stuff. This tax is aimed at increasing total government revenue (...unsurprisingly; isn't that the point of any tax? hah).

Therefore, as we go through the rest of the givens, we should look for ways to tie statements back to EFFECTS ON GOVERNMENT REVENUE.



This means that the only people buying luxury boats are wealthy people.




Aha! "No economic hardship" means that nobody will have to scale back spending or consumption. Therefore, these people will contribute the added tax revenue on boat sales—and won't DECREASE any other spending/consumption activities in any way that would OFFSET that extra tax paid. (1)



Unemployed people generally have to make drastic cuts to spending/consumption. Therefore, these individuals' job losses will likely have the effect of decreasing tax revenue. (2)



And that's it.

So, only (1) and (2) can possibly have any new effects on government revenue here.

We want an answer choice that follows from THESE observations. Do you see how that's definitely choice B?
Choice B is a direct consequence of our deduction that #1 and #2 are the only things potentially affecting tax revenues.




Choice D is the exact opposite of what we know here. Please see my analysis above: "The tax burden would only fall on wealthy people" can only be true if wealthy people are the ONLY buyers of these boats.

Now let's have a go at question 2, with the same awareness of how these problems work and the same goal during our reading of the passage (= to find ways to combine multiple statements to prove further ideas).




Okay... Country Z's government banned competing foreign brands of the same types of products made by the domestic industries mentioned here.



So these other companies PAID LESS for the same stuff made by the industries described in this color above.

If that's true, then the competing import products must sell for lower prices than these companies' products.. And that's why the price point of those things suddenly jumped when those cheaper imports were banned from entering the country.




So these companies WERE more competitive with their PREVIOUS balance-sheet values (costs and revenues).
The only thing that's changed for the blue companies is the cost of that one product. So... the new prices that these companies are now paying for those products must be SO MUCH HIGHER that THAT CHANGE ALONE has wiped out color=#0054a6]these companies'[/color] ability to compete on the export market. (1)



Now, the question. Note that it's asking about the blue companies:

What do we know about the blue companies? Basically, statement (1). Let's look for an answer choice that follows from statement (1).



Okay, this is pretty much exactly statement 1. Win!



Please let me know if you follow the reasoning given above (the reasoning that tracks the given statements one by one).

We are talking about 'critical reasoning' questions so critical thinking is a must - at ALL times.

In question 1, the reason option (D) is not the answer is that it is not supported by the given information.
All the passage tells us is that because of the tax, 20% employees have lost their jobs. The reason the employees lost their jobs could be many
- perhaps to offset the tax burden, the boat manufacturers decided to reduce their boat prices and hence decided to reduce their costs and make do with fewer employees
or
- perhaps the boats became expensive so fewer people bought them leading to losses to boat manufacturers and hence the lay offs
etc.
All we know from the argument is that tax led to lay offs. Mind you, there are many reasons for 'tax leading to lay offs' and the argument doesn't tell us which one took place.

(D) Before the tax was instituted, luxury boats were largely bought by people who were not wealthy.
Is (D) supported by the argument is any way? No.
Perhaps wealthy people bought boats before tax. But now, the boats are too expensive (not worth the money) for even the wealthy people.
Or perhaps the same people as before are buying the same number of boats because the manufacturer has set off the tax increase by laying off people etc.
We don't know. (D) is not supported and is not the answer.

In question 2, we are given that the cost of the companies went up and this limited their ABILITY to compete.
They were not able to compete (nothing about intention - the ability went away). This means they did not have enough profit margin (only then will it limit their ability). We don't have to infer one situation out of many possible. There is only one possible situation. If they had enough profit margin in the first place, their ability to compete would have been maintained. Whether they would have been willing to compete to not is a different matter.
That is why option (A) makes sense here.

Thank you ChiranjeevSingh for taking out time to answer this query.
I missed the verb-ing modifier part. Now, after you pointed out, it completely makes sense to me why Cost can be the ONLY reason .
Also, now I won't forget to apply my SC skills in CR for better understanding of the Stimulus.


Yes RonTargetTestPrep , I follow the reasoning give above.
Thank you for your detailed reply.
I have made a note of the TWO CONSEQUENCES that you have mentioned.
Now I will approach every Inference question keeping the TWO CONSEQUENCES in mind.
While practicing ,I will follow your approach of dissecting every part of the stimulus and making logical linkages between two or more statements to arrive to an answer. ( I hope that this approach becomes a second nature to me so that it comes naturally to me while taking exam)

Thankyou KarishmaB.
Your answers are always to the point and crisp.
I will keep this in mind.


Thank you vv65