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Country X imposes heavy tariffs on imported manufactured

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

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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.


[Reveal] Spoiler:
i chose the last option while the OA is 3rd option.

The question stem says that country Y is planning to shift the company to country y and the company is currently produces goods for sale in country X.Which means the company already have a market for its product in country X.

Also for the 5th options, the OA explanation is that the labour cost is less than the tariff , from where did they make this assumption?

could some one please explain
[Reveal] Spoiler: OA

Last edited by Abhishek009 on 24 May 2016, 12:25, edited 1 time in total.
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Re: Country X imposes heavy tariffs on imported manufactured [#permalink]

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New post 17 Nov 2009, 20:46
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ISBtarget wrote:
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?

Company Y will be able to obtain all the necessary permits to open a factory in Country X.
Company Y currently produces no goods outside its home country.
A sustainable market for Company Y's goods currently exists in Country X.

Company Y's home country does not impose tariffs on imported goods.
Labor costs in Country X are lower than those in Company Y's home country.


i chose the last option while the OA is 3rd option.

The question stem says that country Y is planning to shift the company to country y and the company is currently produces goods for sale in country X.Which means the company already have a market for its product in country X.

Also for the 5th options, the OA explanation is that the labour cost is less than the tariff , from where did they make this assumption?

could some one please explain


the company has determined that it could increase profits by opening a factory in X. It can be assumed that the company has done it's due diligence, analyzing all costs before determining whether to open the factory in X. For the plan to work, there must be a market. One can assume labor costs have already been factored into the determination of the opening of the factory. A company would have already analyzed that the tariffs are more than the labor costs.

I am over-analyzing the question and assuming too much, which also leads me to believe I'm bringing extraneous information into the question thereby complicating the matter. However, with C, this is not the case.

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

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lagomez wrote:
ISBtarget wrote:
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?

Company Y will be able to obtain all the necessary permits to open a factory in Country X.
Company Y currently produces no goods outside its home country.
A sustainable market for Company Y's goods currently exists in Country X.

Company Y's home country does not impose tariffs on imported goods.
Labor costs in Country X are lower than those in Company Y's home country.


i chose the last option while the OA is 3rd option.

The question stem says that country Y is planning to shift the company to country y and the company is currently produces goods for sale in country X.Which means the company already have a market for its product in country X.

Also for the 5th options, the OA explanation is that the labour cost is less than the tariff , from where did they make this assumption?

could some one please explain


the company has determined that it could increase profits by opening a factory in X. It can be assumed that the company has done it's due diligence, analyzing all costs before determining whether to open the factory in X. For the plan to work, there must be a market. One can assume labor costs have already been factored into the determination of the opening of the factory. A company would have already analyzed that the tariffs are more than the labor costs.

I am over-analyzing the question and assuming too much, which also leads me to believe I'm bringing extraneous information into the question thereby complicating the matter. However, with C, this is not the case.


The question stem says company is already producing the products for sale in country X which implies that there is already a market. if this is an implication from the question itself why would we assume that the labour cost is less than the tariff with no clue or information from the question

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

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New post 17 Nov 2009, 21:33
ISBtarget wrote:
lagomez wrote:
ISBtarget wrote:
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?

Company Y will be able to obtain all the necessary permits to open a factory in Country X.
Company Y currently produces no goods outside its home country.
A sustainable market for Company Y's goods currently exists in Country X.

Company Y's home country does not impose tariffs on imported goods.
Labor costs in Country X are lower than those in Company Y's home country.


i chose the last option while the OA is 3rd option.

The question stem says that country Y is planning to shift the company to country y and the company is currently produces goods for sale in country X.Which means the company already have a market for its product in country X.

Also for the 5th options, the OA explanation is that the labour cost is less than the tariff , from where did they make this assumption?

could some one please explain


the company has determined that it could increase profits by opening a factory in X. It can be assumed that the company has done it's due diligence, analyzing all costs before determining whether to open the factory in X. For the plan to work, there must be a market. One can assume labor costs have already been factored into the determination of the opening of the factory. A company would have already analyzed that the tariffs are more than the labor costs.

I am over-analyzing the question and assuming too much, which also leads me to believe I'm bringing extraneous information into the question thereby complicating the matter. However, with C, this is not the case.


The question stem says company is already producing the products for sale in country X which implies that there is already a market. if this is an implication from the question itself why would we assume that the labour cost is less than the tariff with no clue or information from the question


Is this an official GMAT question (from GMAT Prep or official guides)? It doesn't seem like it to me.

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

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New post 17 Nov 2009, 21:35
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Company Y will be able to obtain all the necessary permits to open a factory in Country X.
- Obtaining permits does not guarantee profits in the long term. So this is out.

Company Y currently produces no goods outside its home country.
- Out of scope

A sustainable market for Company Y's goods currently exists in Country X.
If there is a market, then profits would follow(Remember in the long run). Hence the answer.

Company Y's home country does not impose tariffs on imported goods.
- Out of scope

Labor costs in Country X are lower than those in Company Y's home country.
-Cost has lots of components such as capital cost, distribution cost etc... Labor cost is one such cost. it could happen that, in country Y, Labor costs could be low and capital cost cost could be high resulting in over all higher cost of the product than tariffs could account resulting in lesser margins. hence this choice is wrong.

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

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With C, first of all, the word "sustainable" is a key word. There may be a market of country Y's goods in country X, but if the market is not sustainable, then the plan may not work.

With E, because the question asks "which assumption must be true"? We can't not say labor cost must be lower for the plan to work.
Labor cost is just one of the costs, labor cost may not be lower, but if material cost in country X or some other costs are lower, the plan still works.
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Re: Country X imposes heavy tariffs on imported manufactured [#permalink]

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New post 27 Nov 2009, 17:56
Thanks for the clarification. Is this from the MGAT CAT exam?

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

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New post 29 Nov 2009, 01:36
IMO C

sustainable market is needed for a long term profit which Y wants as mentioned in the statement.

Other options are irrelevant or out of scope.
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Re: Country X imposes heavy tariffs on imported manufactured [#permalink]

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New post 29 Nov 2009, 12:47
C is correct.

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

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New post 29 Nov 2009, 15:50
ISBtarget wrote:
The question stem says company is already producing the products for sale in country X which implies that there is already a market. if this is an implication from the question itself why would we assume that the labour cost is less than the tariff with no clue or information from the question


You are generalizing. Premise-1 only states that Country X imposes heavy tariff on imported goods. Premise-2 states that Company Y is planning to increase profits by starting operations inside country X in order to minimize the heavy tariffs for imports.

There is no clear implication that Company Y is already exporting to Country X. What if, Company Y is considering selling it's stuff afresh, and never done before, in Country X? So you can't generalize. For Company Y to start operations in Country X, first off, there should be a sustainable market existing in Country X. Thereafter, long-term profits can be envisaged as in Premise-2. So automatically, C is the right answer.
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Re: Country X imposes heavy tariffs on imported manufactured [#permalink]

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New post 29 Nov 2009, 22:14
here is the explanation from Manhattan GMAT for this question:



The text tells us only that Country X imposes heavy tariffs on imported goods and that Company Y believes it can increase long-term profits by opening a factory in Country X so it can avoid having to import its goods into Country X. We are asked to select an answer choice that is an assumption required for Company Y's belief to be valid.

(A) While this is a tempting answer, it is not necessary to assume that Company Y will be able to obtain all necessary permits. The text does not indicate whether Company Y will actually be able to implement the plan, only that the plan could increase profits if implemented.

(B) We are given no information about Company Y's activities in other countries.

(C) CORRECT. 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.

(D) We are given no information about tariffs in Company Y's home country.

(E) We need not assume that labor costs are lower in Country X. It could be that labor costs in Country X are higher than those in Company Y's home country but the increased cost of labor is still less than the tariffs. This would result in a net savings for Company Y in Country X.

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

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New post 30 Nov 2009, 07:37
ISBtarget wrote:
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?

Company Y will be able to obtain all the necessary permits to open a factory in Country X.
Company Y currently produces no goods outside its home country.
A sustainable market for Company Y's goods currently exists in Country X.

Company Y's home country does not impose tariffs on imported goods.
Labor costs in Country X are lower than those in Company Y's home country.


i chose the last option while the OA is 3rd option.




The question stem says that country Y is planning to shift the company to country y and the company is currently produces goods for sale in country X.Which means the company already have a market for its product in country X.

Also for the 5th options, the OA explanation is that the labour cost is less than the tariff , from where did they make this assumption?

could some one please explain




My answer is this "A sustainable market for Company Y's goods currently exists in Country X."

The premise specifically states that "Company Y has determined that it could increase its profits in the long term". In order for the company to be successful in its plan (to profit long term), the answer must address that this will be a long term solution. "A sustainable market" is just different wording for "long term market".

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

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New post 30 Nov 2009, 13:21
Thanks for the explanation.

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

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New post 01 Dec 2009, 00:30
At the first thought, i would have chosen E, but nice explanation burnttwinky, sustainable is the key here :)

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

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New post 01 Dec 2009, 11:01
Yeah, I remember get this one incorrectly the first time as well. This is a MGMAT question, so other test prep companies tend to have a few more holes in their arguments opposed to the actual gmat question.

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

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New post 03 Dec 2009, 01:19
+1 for C

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

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New post 03 Dec 2009, 13:57
It appears that many of the MGMAT questions have some fuzzy or faulty logic at times.

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

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New post 20 Jan 2010, 14:39
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.
[Reveal] Spoiler:
C

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Last edited by mojorising800 on 21 Jan 2010, 10:49, edited 1 time in total.

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Re: Country X imposes heavy tariffs [#permalink]

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New post 20 Jan 2010, 14:51
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. - Irrelevant. The conclusion talks about increasing profits and hence this statement doesn't help

B.Company Y currently produces no goods outside its home country. - Irrelevant

C.A sustainable market for Company Y’s goods currently exists in Country X. - The stem stays in the long runn. Hence currently existing is hardly anything to bother.

D.Company Y’s home country does not impose tariffs on imported goods. - Imported goods in Company Y's home country is not the point of discussion

E.Labor costs in Country X are lower than those in Company Y’s home country. - Correct. For the determination of Country Y to be true, this should be true. Else you cannot achieve increased profits

IMO... E
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Re: Country X imposes heavy tariffs [#permalink]

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New post 20 Jan 2010, 15:42
I think that the key here is in the words "...it could increase its profits in the long term...".

A) The statement is hypotetical, therefore it does not require certainty in terms of viability
B) Out of scope. The passage concerns only Country X, the home country of Company Y and Company Y
C) In order to increase profits IN THE LONG TERM, the internal market of Country X cannot collapse. Hence C is my pick.
D) Out of scope. Company Y is considering the production of goods to be sold in Country Y, not back home. The passage does not suggest that Company Y would be relocating in Country X, just that it will open a factory there.
E) If labor costs are equal in the two countries, Company Y would still benefit from avoiding import taxes, hence E is unnecessary.

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Re: Country X imposes heavy tariffs   [#permalink] 20 Jan 2010, 15:42

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