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Several governments in Asia have traditionally raised extra government

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Several governments in Asia have traditionally raised extra government  [#permalink]

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New post Updated on: 24 Oct 2018, 04:12
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Several governments in Asia have traditionally raised extra government revenue by setting up factories to sell goods to large retailers in the United States. The profits from these enterprises have been used to fund social services in these countries. However, the large American retailers have recently put significant pricing pressure on the factories run by these governments, reducing the profits from these enterprises by over 90 percent.

Which of the following conclusions is best supported by the information above?

A.The Asian governments cited in the stimulus generally provide large amounts of social services for their citizens, such as free health care to the poor.
B. If the governments cited in the stimulus do not find alternative sources of revenue, they must either cut the level of the social services funded by the enterprises or incur debt to keep them at their present level.
C. Some large retailers in the United States are making record profits by squeezing price concessions from their main suppliers in Asia.
D. If the Asian governments cited were to reduce the operating costs of their factories, they would be able to continue running the social service programs at the current levels.
E.The level of taxation in Asian countries is generally lower than the levels in the United States and other Western developed countries.

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Originally posted by mayursurya on 11 Oct 2018, 09:01.
Last edited by gmat1393 on 24 Oct 2018, 04:12, edited 2 times in total.
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Re: Several governments in Asia have traditionally raised extra government  [#permalink]

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New post 11 Oct 2018, 09:20
The Question Part is missing??

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Re: Several governments in Asia have traditionally raised extra government  [#permalink]

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New post 11 Oct 2018, 09:44
pankajpatwari Now its complete
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Re: Several governments in Asia have traditionally raised extra government  [#permalink]

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New post 24 Oct 2018, 22:25
Can someone explain why D is wrong? By reducing operational costs , profits can be increased. In that case the asian companies can continue to do social service. Can you explain the mistake in this thought process.
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Re: Several governments in Asia have traditionally raised extra government  [#permalink]

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New post 24 Oct 2018, 23:09
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mayursurya wrote:
Several governments in Asia have traditionally raised extra government revenue by setting up factories to sell goods to large retailers in the United States. The profits from these enterprises have been used to fund social services in these countries. However, the large American retailers have recently put significant pricing pressure on the factories run by these governments, reducing the profits from these enterprises by over 90 percent.

Which of the following conclusions is best supported by the information above?

A.The Asian governments cited in the stimulus generally provide large amounts of social services for their citizens, such as free health care to the poor.
B. If the governments cited in the stimulus do not find alternative sources of revenue, they must either cut the level of the social services funded by the enterprises or incur debt to keep them at their present level.
C. Some large retailers in the United States are making record profits by squeezing price concessions from their main suppliers in Asia.
D. If the Asian governments cited were to reduce the operating costs of their factories, they would be able to continue running the social service programs at the current levels.
E.The level of taxation in Asian countries is generally lower than the levels in the United States and other Western developed countries.


Argument:
Several governments in Asia have traditionally raised extra government revenue by setting up factories to sell goods in United States.
The profits from these have been used to fund social services in these countries.
American retailers have recently put significant pricing pressure on the factories, reducing the profits by 90%.

Since profits have reduced substantially, it is logical that the social services program will be impacted since the profit was being used for social services. So then, either other sources of revenue need to be found or the level of social service expenditure needs to be cut or debt needs to be incurred to maintain the current level of social services. This is option (B).
Let's look at other options too.

A.The Asian governments cited in the stimulus generally provide large amounts of social services for their citizens, such as free health care to the poor.
The level of social services provided by the Govt is not known. Perhaps it is bare minimum for a large population, perhaps it is a lot.

C. Some large retailers in the United States are making record profits by squeezing price concessions from their main suppliers in Asia.
We don't know why price cuts were made by US retailers. Perhaps their revenues have dwindled, perhaps their other costs have sky rocketed, or perhaps they wanted higher profit margin, we don't know.

D. If the Asian governments cited were to reduce the operating costs of their factories, they would be able to continue running the social service programs at the current levels.
Not known. Can a reduction in operating costs make up for all the lost revenue (to maintain social service programs at current levels)? We don't know. Perhaps the operating costs are minimal, perhaps the major cost is servicing the debt which was required to set up the factories. Perhaps even if the operating costs are made 0, the 90% drop in profit can still not be made up. The point is, from the given information, we cannot conclude this.

E.The level of taxation in Asian countries is generally lower than the levels in the United States and other Western developed countries.
No mention of the level of taxation. Not relevant.

Answer (B)
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Re: Several governments in Asia have traditionally raised extra government &nbs [#permalink] 24 Oct 2018, 23:09
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