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# S92-27

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Math Expert
Joined: 02 Sep 2009
Posts: 58453

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16 Sep 2014, 01:47
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Difficulty:

65% (hard)

Question Stats:

53% (01:48) correct 47% (02:12) wrong based on 76 sessions

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The automobile industry in Country A argues that, because foreign automakers underpay workers and get nationally subsidized materials, they can offer artificially low prices. Thus, the industry argues, the current 8 percent tariff on imported products should be increased for automobiles. However, other industries in Country A remain healthy despite competition with imported products without exceptional tariffs. This fact indicates an increased automobile tariff is unnecessary.

Which of the following, if true, most strongly supports the argument of Country A's automobile industry against the challenge made above?

A. In some industries -- such as childcare, scientific equipment, and higher education -- consumers care far more about the quality of the product than the price.
B. Many governments support automobile exports so strongly that they would be willing to increase subsidies to offset any additional costs that are a result of exports.
C. There are several industries for which the ratio of workers' wages in Country A to the workers' wages in other countries is even higher than it is in the automobile industry.
D. Because of a scarcity of mineral and metal resources, Country A's automobile industry has to import, and pay tariffs on, most mineral or metal materials used to produce automobiles.
E. No industries in Country A other than the automobile industry, including those whose raw materials are highly taxed, have asked for an increase of the 8 tariff

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16 Sep 2014, 01:47
Official Solution:

The automobile industry in Country A argues that, because foreign automakers underpay workers and get nationally subsidized materials, they can offer artificially low prices. Thus, the industry argues, the current 8 percent tariff on imported products should be increased for automobiles. However, other industries in Country A remain healthy despite competition with imported products without exceptional tariffs. This fact indicates an increased automobile tariff is unnecessary.

Which of the following, if true, most strongly supports the argument of Country A's automobile industry against the challenge made above?

A. In some industries -- such as childcare, scientific equipment, and higher education -- consumers care far more about the quality of the product than the price.
B. Many governments support automobile exports so strongly that they would be willing to increase subsidies to offset any additional costs that are a result of exports.
C. There are several industries for which the ratio of workers' wages in Country A to the workers' wages in other countries is even higher than it is in the automobile industry.
D. Because of a scarcity of mineral and metal resources, Country A's automobile industry has to import, and pay tariffs on, most mineral or metal materials used to produce automobiles.
E. No industries in Country A other than the automobile industry, including those whose raw materials are highly taxed, have asked for an increase of the 8 tariff

In this argument, automakers claim that the tariff on imported cars ought to be increased, because the policies of foreign governments allow foreign automakers to offer cars at artificially low prices, and undersell country A's cars. This argument is criticized by citing that other industries in Country A are handling foreign competition without additional tariffs.

We are asked to identify the statement that supports the automakers. The correct answer should bolster the case that the automobile makers are at some special disadvantage and thus need the tariffs.

Choice D says that automakers require many imported raw materials, and that they must "pay tariffs" on each of them. This presents the auto industry with an additional challenge, which makes them even less able to offer competitive prices. This supports the automakers' argument--that the current 8 percent tax on imported products should be increased for automobiles. The automobile industry is thus different from other industries in Country A and requires special protection. Choice D is correct.

Choice A introduces irrelevant information, though it might appeal to the test-taker in the superficial sense that it suggests the automobile industry is in some way different from other industries in Country A. Even if, in "some industries," higher price does not concern many consumers, it is not clear that this is true of the auto industry. Besides, if the auto industry is price-insensitive, this actually argues against raising tariffs, since the prices of various cars will not impact sales.

Choice B introduces material that weakens the automakers' argument. If foreign governments are willing to "increase subsidies" to automakers to "offset" higher tariffs, then higher tariffs in Country A will not be effective anyway (in helping Country A's automakers compete against foreign automakers).

Choice C introduces material that weakens the automakers' argument. The auto industry in country A complains explicitly about the tendency of foreign competitors to underpay workers. However, if in other industries, workers are underpaid even more severely by foreign competitors, then the automobile industry's case for a special tariff on imported cars is weakened. If anything, higher tariffs should be placed on foreign products in other industries.

Choice E introduces irrelevant material. The automakers' argument hinges on the idea that an increase in the tariff will help automakers in Country A compete against foreign automakers who, according to Country A automakers, offer artificially low prices because they underpay workers and receive subsidized materials. The fact that "no other industries" have asked for special tariffs has no impact on whether the auto industry's claim is justified.

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GMAT 1: 550 Q39 V27
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15 Jan 2018, 19:38
How can this support the conclusion, if tariff on import are raised, the automobile industry in country A will be penalized too ?
Re: S92-27   [#permalink] 15 Jan 2018, 19:38
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# S92-27

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