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# Country X imposes heavy tariffs on imported manufactured

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Senior Manager
Joined: 12 Oct 2008
Posts: 453
Re: Country X imposes heavy tariffs  [#permalink]

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06 Feb 2010, 08:20
I do not agree with the OA if it is C. C is already stated in the passage.

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.

Company Y does already has a market in country X and it is planning to increase the profit. Therefore, C is already in the passage.

I think answer must be A. Let's negate A.....

A - Company Y will be able to obtain all the necessary permits to open a factory in Country X.

Negate A - Company Y will not be able to obtain all the necessary permits to open a factory in Country X.

If Y didn't able to get all necessary permits then it may open and may not open the factory in X. Conclusion fails apart and therefore, A must be the answer.

Please correct me if I am wrong.

What is the source of the answer and what is the OE?
Intern
Joined: 14 Sep 2009
Posts: 3
Re: Country X imposes heavy tariffs  [#permalink]

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06 Feb 2010, 10:50
IMO --- C
Current scenario :

Comapny Y is currently making profit when goods are imported and sold in country X . Since the import duties/tarifffs are very high, profit of company Y is low. So inorder to avoid import duties it plan to localize the manufacturing process.....but with the assumption that labour cost shouldnt offset the benefit derived from saving import duties.

sustainability is out of scope of the stem ......(however in the long run is does mentioned but main point of the stem is about increasing profit)
Manager
Joined: 07 Jan 2010
Posts: 181
Re: Country X imposes heavy tariffs  [#permalink]

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09 Feb 2010, 07:21

E is not an answer: low labor cost alone would not guarantee low production cost. What if raw material is more expensive because of a duty/tax/high demand.

A is not an answer: it is very basic requirement and true, but maybe the company does not need a permit for inside production. I eliminated it because it did not fit in with the 'increase its profits in the long term' part.
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Re: Country X imposes heavy tariffs on imported manufactured  [#permalink]

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13 May 2011, 20:24
negating C clearly crosses the conclusion.
Manager
Joined: 16 Mar 2011
Posts: 164
Re: Country X imposes heavy tariffs on imported manufactured  [#permalink]

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13 May 2011, 20:44
although A is very pealing but C is a better answer. however, i dont think this is an official question, since the assumption you are making needs a little bit of imagination
Senior Manager
Joined: 21 Dec 2010
Posts: 456
Re: Country X imposes heavy tariffs on imported manufactured  [#permalink]

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13 May 2011, 21:16
i think the question is nonsensical and from some absurd and unreliable source.
Manager
Joined: 16 Mar 2011
Posts: 164
Re: Country X imposes heavy tariffs on imported manufactured  [#permalink]

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13 May 2011, 21:28
garimavyas wrote:
i think the question is nonsensical and from some absurd and unreliable source.

I do agree with you, since any way i think about it, one can not really fully eliminate answer choice A and you need to stretch to reach C
Manager
Joined: 09 Jul 2010
Posts: 87
Re: Country X imposes heavy tariffs on imported manufactured  [#permalink]

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04 Mar 2012, 20:12
Hi,

Could someone tell the answer for this and also explain it,

Thanks

Ravi
Intern
Joined: 28 Feb 2011
Posts: 43
Re: Country X imposes heavy tariffs on imported manufactured  [#permalink]

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04 Mar 2012, 23:08
profit = sales - cost

cost has many component out of which 1 is mentioned in stimulus (import tariff ). thus any valid assumption here could be sales price would remain as high as previously . any other factors that would come under cost (like price of raw materials, machinery labor )would remain same or get lowered in country X .

Option E mention abt cost of labor and hence seems like a valid choice
Intern
Joined: 28 Feb 2011
Posts: 43
Re: Country X imposes heavy tariffs on imported manufactured  [#permalink]

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04 Mar 2012, 23:15
after going thru the explanation choice A seems like correct option. Negating both A and E

Negating A Company Y will NOT be able to obtain all the necessary permits to open a factory in Country X. thus conclusion abt increased profit falls apart.

Negating E Labor costs in Country X are NOT lower than those in Company Y’s home country. Even if they are same in two countries, profit in setting facotry in country X could still result in higher profit due to saving on import tariff. hence conclusin can still be correct.
Manager
Joined: 17 Sep 2011
Posts: 147
Re: Country X imposes heavy tariffs on imported manufactured  [#permalink]

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05 Mar 2012, 00:13
I think the correct answer is C because if there is no sustainable market for Company Y’s goods currently existing in Country X the company's determination to increase profits is impossible to achieve.
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Senior Manager
Joined: 08 Jun 2010
Posts: 311
Location: United States
Concentration: General Management, Finance
GMAT 1: 680 Q50 V32
Re: Country X imposes heavy tariffs on imported manufactured  [#permalink]

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05 Mar 2012, 00:19
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.

Between C and E its a clear E. The reason is the C is not even an assumption, its a fact stated in the stimulus. "the goods that it currently produces in its home country for sale in Country X. "
Manager
Joined: 12 Nov 2011
Posts: 75
Re: Country X imposes heavy tariffs  [#permalink]

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07 Mar 2012, 00:52
I do not agree with the OA if it is C. C is already stated in the passage.

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.

Company Y does already has a market in country X and it is planning to increase the profit. Therefore, C is already in the passage.

I think answer must be A. Let's negate A.....

A - Company Y will be able to obtain all the necessary permits to open a factory in Country X.

Negate A - Company Y will not be able to obtain all the necessary permits to open a factory in Country X.

If Y didn't able to get all necessary permits then it may open and may not open the factory in X. Conclusion fails apart and therefore, A must be the answer.

Please correct me if I am wrong.

What is the source of the answer and what is the OE?

completely agree with that post
please explaine what is wrong with that reasoning?
Manager
Status: I will be back!
Joined: 13 Feb 2012
Posts: 53
Location: India
Re: Country X imposes heavy tariffs on imported manufactured  [#permalink]

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18 Mar 2012, 04:34
IMO E.

If the labor cost in country X is more than Y's country then this it will weaken the conclusion.

i think C would be right if it would have stated
"A sustainable market for Company Y’s goods WILL exists in Country X."

Correct me if i m wrong.

thanks
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Manager
Joined: 12 Mar 2012
Posts: 247
Concentration: Operations, Strategy
Re: Country X imposes heavy tariffs on imported manufactured  [#permalink]

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18 Mar 2012, 21:31
IMO E.

If the labor cost in country X is more than Y's country then this it will weaken the conclusion.

i think C would be right if it would have stated
"A sustainable market for Company Y’s goods WILL exists in Country X."

Correct me if i m wrong.

thanks

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?

C.A sustainable market for Company Y’s goods currently exists in Country X.
E.Labor costs in Country X are lower than those in Company Y’s home country.

C is correct.
negate E. --> Labor costs in Country X are not lower than those in Company Y’s home country.
okay now this thing doesnt alters the conclusion. suppose the inflated tariffs that Y had to pay=200
labor cost in Y=50
labor cost in X=60
THEN also Y is in profit and its conclusion stands of increased profit.

hence for this case the negated assumption doesnt alters the conclusion. Also by argument we cant deduce anything regarding the labor cost and increased tariff, hence E is basically does nothing to the conclusion.

hope this helps..!!
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Senior Manager
Joined: 13 Aug 2012
Posts: 429
Concentration: Marketing, Finance
GPA: 3.23
Re: Country X imposes heavy tariffs on imported manufactured  [#permalink]

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18 Jan 2013, 22:18
Country Y pays tariff for their exported goods to Country X (or imported goods of Country X from Y)...
Country Y plans to manufacture in Country X and feels that will increase profits...

C and E seems to be confusing for others... BUT Labor Costs is only one of the many possible factors to contribute to decrease in profits... The argument did not mention exactly possible factors that will contribute to increase profits... BUT (C) is a basic requriement to making sales... to have a sustainable market.. If there is no such, then there is no long-term profitability..

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Re: Country X imposes heavy tariffs on imported manufactured  [#permalink]

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28 Aug 2013, 22:25
jaituteja wrote:
Hi pqhai,

Can you help me with this one.

country-x-imposes-heavy-tariffs-on-imported-manufactured-87003-20.html

I am confused b/w A,C and E.

Hi Jai

I'm happy to help.

ANALYZE THE ARGUMENT:

Fact: Country X imposes heavy tariffs on imported manufactured goods.
Conclusion: 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.

KEY words: “profits the long term”. If Y wants to make profits in the long term, it MUST be able to sell its products. If Y can't sell its products, the strategy will fail.

For Company Y's determination to be true, which of the following assumptions must also be true?

Company Y will be able to obtain all the necessary permits to open a factory in Country X.
Wrong. Obtain all permits does NOT guarantee that Y can sell products and have long term profits. Selling products does not depend on acquiring permits ONLY.

Company Y currently produces no goods outside its home country.
Wrong. It’s fact. B cannot be the assumption. Clearly, fact is not an assumption.

A sustainable market for Company Y's goods currently exists in Country X.
Correct. Key word is “sustainable market”. C means customers in country X are willing to buy Y’s goods for long term. That is the key for Y’s dermination to be true.

Company Y's home country does not impose tariffs on imported goods.
Wrong. Out of scope. The argument does not talk about the tariff policies in country Y.

Labor costs in Country X are lower than those in Company Y's home country.
Wrong. Quite Tempting. Labor costs is just one of many costs involving the manufacturing process. What if labor costs are lower in Country X, but other costs such as rent, electricity, insurances, etc… are higher than those in Country Y. Thus cost of good sold of Y’s goods is high, making prices for Y’s good not competitive.

Hope it helps.
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"Designing cars consumes you; it has a hold on your spirit which is incredibly powerful. It's not something you can do part time, you have do it with all your heart and soul or you're going to get it wrong."

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Joined: 21 Aug 2012
Posts: 112
Re: Country X imposes heavy tariffs on imported manufactured  [#permalink]

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28 Aug 2013, 23:04
pqhai wrote:
jaituteja wrote:
Hi pqhai,

Can you help me with this one.

country-x-imposes-heavy-tariffs-on-imported-manufactured-87003-20.html

I am confused b/w A,C and E.

Hi Jai

I'm happy to help.

ANALYZE THE ARGUMENT:

Fact: Country X imposes heavy tariffs on imported manufactured goods.
Conclusion: 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.

KEY words: “profits the long term”. If Y wants to make profits in the long term, it MUST be able to sell its products. If Y can't sell its products, the strategy will fail.

For Company Y's determination to be true, which of the following assumptions must also be true?

Company Y will be able to obtain all the necessary permits to open a factory in Country X.
Wrong. Obtain all permits does NOT guarantee that Y can sell products and have long term profits. Selling products does not depend on acquiring permits ONLY.

Company Y currently produces no goods outside its home country.
Wrong. It’s fact. B cannot be the assumption. Clearly, fact is not an assumption.

A sustainable market for Company Y's goods currently exists in Country X.
Correct. Key word is “sustainable market”. C means customers in country X are willing to buy Y’s goods for long term. That is the key for Y’s dermination to be true.

Company Y's home country does not impose tariffs on imported goods.
Wrong. Out of scope. The argument does not talk about the tariff policies in country Y.

Labor costs in Country X are lower than those in Company Y's home country.
Wrong. Quite Tempting. Labor costs is just one of many costs involving the manufacturing process. What if labor costs are lower in Country X, but other costs such as rent, electricity, insurances, etc… are higher than those in Country Y. Thus cost of good sold of Y’s goods is high, making prices for Y’s good not competitive.

Hope it helps.

Hi pqhai,

What if i say that a sustainable market is necessary, but if the company X is not able to produce goods due to higher restriction, would there be any production.

For E,
Profits= Revenue - Expense,
Not if Labor cost in X is < Labor cost in Y,
then profits will increase.

I agree that sustainable market should be there to sell goods, but to sell good one needs to produce them first.

Our motive is to increase profitability......
Goods produced ---> Good sold ----> profitability increased

For C, if i say that amount saved from non-importing is less than the increase in cost of raw materials/rent/expenses while switching to country X, so even if sustainable market is there, the profitability will decrease in that case..

Thanks,
Jai
_________________

MODULUS Concept ---> http://gmatclub.com/forum/inequalities-158054.html#p1257636
HEXAGON Theory ---> http://gmatclub.com/forum/hexagon-theory-tips-to-solve-any-heaxgon-question-158189.html#p1258308

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Joined: 15 Jun 2012
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Re: Country X imposes heavy tariffs on imported manufactured  [#permalink]

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28 Aug 2013, 23:12
1
jaituteja wrote:
pqhai wrote:
jaituteja wrote:
Hi pqhai,

Can you help me with this one.

country-x-imposes-heavy-tariffs-on-imported-manufactured-87003-20.html

I am confused b/w A,C and E.

Hi Jai

I'm happy to help.

ANALYZE THE ARGUMENT:

Fact: Country X imposes heavy tariffs on imported manufactured goods.
Conclusion: 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.

KEY words: “profits the long term”. If Y wants to make profits in the long term, it MUST be able to sell its products. If Y can't sell its products, the strategy will fail.

For Company Y's determination to be true, which of the following assumptions must also be true?

Company Y will be able to obtain all the necessary permits to open a factory in Country X.
Wrong. Obtain all permits does NOT guarantee that Y can sell products and have long term profits. Selling products does not depend on acquiring permits ONLY.

Company Y currently produces no goods outside its home country.
Wrong. It’s fact. B cannot be the assumption. Clearly, fact is not an assumption.

A sustainable market for Company Y's goods currently exists in Country X.
Correct. Key word is “sustainable market”. C means customers in country X are willing to buy Y’s goods for long term. That is the key for Y’s dermination to be true.

Company Y's home country does not impose tariffs on imported goods.
Wrong. Out of scope. The argument does not talk about the tariff policies in country Y.

Labor costs in Country X are lower than those in Company Y's home country.
Wrong. Quite Tempting. Labor costs is just one of many costs involving the manufacturing process. What if labor costs are lower in Country X, but other costs such as rent, electricity, insurances, etc… are higher than those in Country Y. Thus cost of good sold of Y’s goods is high, making prices for Y’s good not competitive.

Hope it helps.

Hi pqhai,

What if i say that a sustainable market is necessary, but if the company X is not able to produce goods due to higher restriction, would there be any production.

For E,
Profits= Revenue - Expense,
Not if Labor cost in X is < Labor cost in Y,
then profits will increase.

I agree that sustainable market should be there to sell goods, but to sell good one needs to produce them first.

Our motive is to increase profitability......
Goods produced ---> Good sold ----> profitability increased

For C, if i say that amount saved from non-importing is less than the increase in cost of raw materials/rent/expenses while switching to country X, so even if sustainable market is there, the profitability will decrease in that case..

Thanks,
Jai

Hi Jai

C: A sustainable market for Company Y's goods currently exists in Country X.
You can see the blue part. It means company Y has been able to produce goods and sell them in Country X already. That's the base for the success of Y in the future.

E: You have a common fallacy in reasoning. You assume labor is the only factor --OR-- the main factor of Y's total costs. What if labor cost decreases, but other costs increase (rent, insurance, legal fees, electricity...). You can't say labor cost decreases = Y's cost of good sold decreases too.
Formula: Profit = Revenue - Labor costs - Material costs - Rent - Other costs.
==> Only labor costs decreases does NOT guarantee total cost decrease.

Hope it helps.
_________________

Please +1 KUDO if my post helps. Thank you.

"Designing cars consumes you; it has a hold on your spirit which is incredibly powerful. It's not something you can do part time, you have do it with all your heart and soul or you're going to get it wrong."

Chris Bangle - Former BMW Chief of Design.

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Joined: 21 Aug 2012
Posts: 112
Re: Country X imposes heavy tariffs on imported manufactured  [#permalink]

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28 Aug 2013, 23:26
Hi,

Thanks,

Can you enlighten on A.
If the company X has restriction to product goods, then A should be an assumption.

Thanks,
Jai
_________________

MODULUS Concept ---> http://gmatclub.com/forum/inequalities-158054.html#p1257636
HEXAGON Theory ---> http://gmatclub.com/forum/hexagon-theory-tips-to-solve-any-heaxgon-question-158189.html#p1258308

Re: Country X imposes heavy tariffs on imported manufactured &nbs [#permalink] 28 Aug 2013, 23:26

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