Three large companies and seven small companies currently

C goes completely out of context. According to the statement, if the industry is regulated then seven compalnies will shut down. so E clearly provides assumption that they do make nothing of the required standards.
Hope it helps.

OA - E. But could someplease explain what is wring with B.

Amitdgr - THe conclusion is also weakened if you negate B. What say?

If you negate B, it would only mean that the cost of replacement is either same for both small and large companies or higher for larger companies. The affordability of replacement is being compared instead of the absolute cost of replacement.

Larger companies, assuming they are cash rich, can bear higher cost of replacement and would still see smaller companies exit the market since they couldn't bear even a lower replacement cost!

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Three large companies and seven small companies currently manufacture a product with potential military applications. If the government regulates the industry, it will institute a single set of manufacturing specifications to which all ten companies will have to adhere. In this case, therefore, since none of the seven small companies can afford to convert their production lines to if new set of manufacturing specifications, only the three large companies will be able to remain in business.

Notes
10 companies make a product
Govt will place requirements on the industry.
7 companies can't afford any change
Only 3 big companies will stay in business

ASU:
7 companies can't combine
3 companies can afford the change
Other factors resulting from change won't shut the 3 companies down.

Which of the following is an assumption on which the author’s argument relies?

A. None of the three large companies will go out of business if the government does not regulate the manufacture of the product.

Wrong:
If the government doesn't regulate the industry isn't an issue.

B. It would cost more to convert the production lines of the small companies to a new set of manufacturing specifications than it would to convert the production lines of the large companies.

Wrong (and a trap):
Conversion costs between companies isn't an issue.

C. Industry lobbyists will be unable to dissuade the government from regulating the industry.

Wrong:
Lobbyists are not part of argument.

D. Assembly of the product produced according to government manufacturing specifications would be more complex than current assembly procedures.

Wrong:
Out of scope. We don't care about complexity, but about cost.

E. None of the seven small companies currently manufactures the product to a set of specifications that would match those the governm

Correct:
If the seven companies meet the governments requirements, then they wouldn't go out of business.

It is clearly stated in premise - "In this case, therefore, since none of the seven small companies can afford to convert their production lines to a new set of manufacturing specifications".

So my question is,-

1) In case of answer choice B - Only if the cost is higher then only we have the question of affordability, which the 7 small companies cannot bear. Thus B should be the answer.

2) In case of answer choice E - It is possible that small companies does not manufactures the product to a set of specifications that would match those the government. And 7 small companies might have to upgrade their production lines. Now the question should be if the upgradation is affordable or not for the smaller companies. If any smaller companies can bear the cost then they will remain in the competition.

The colclusion is - "the 7 small companies will be out of the competition."So when the small companies will be out of compitition only if they cannot afford the upgradation. And in the premise author already predicts that the 7 small companies will be out of the compition. Thus the author is sure that the small companies will have to upgrade. Thus I think E shouldn't be right.

Only option B and E are worth considering...

The conclusion is :- since none of the seven small companies can afford to convert their production lines to a new set of manufacturing specifications, only the three large companies will be able to remain in business.

Option B if negated ,

It would NOT cost more to convert the production lines of the small companies to a new set of manufacturing specifications than it would to convert the production lines of the large companies.
So the cost to convert can be same for both seven small companies and the three large companies.

The large companies will be able to afford the cost of conversion and remain in business and the seven small companies will perish.
Our conclusion is that none of the seven small companies will be able to stay in business and only the three large companies will remain in business. Our conclusion
follows after negation and option B cant be the assumption.

Option E if negated,

Some of the seven small companies currently manufactures the product to a set of specifications that would match those the government would institute if the industry were to be regulated.

So these small companies will be able afford the cost to convert and will stay in business.
Our conclusion was that none of the seven companies will stay in business.
Hence after negating option E , our conclusion cant be derived.

Option E is our assumption.

Please give me kudo s if you liked my explanation.

GMATNinja generis

Official Explanation:

Reasoning: What other information must be implicit in the argument if the argument is to justify its conclusion? The argument is that if the government regulates the industry, it will impose its own manufacturing specifications on all the companies; but the seven small companies cannot afford to adopt new specifications, and consequently they will be forced out of business. This reasoning assumes that the seven small companies would all have to change their current procedures to match the new specifications, or else go entirely out of business. Therefore, look for an answer option that expresses or follows from this assumption.

A The argument is about what will happen if the government does regulate the industry, not what will happen if it does not.
B This possibility is certainly not ruled out by the information given—but that does not mean that the argument requires that it be assumed. It simply suggests one among a number of possible circumstances that could help explain why none of the small companies could afford a conversion—if indeed a conversion is actually needed.
C The argument is about what would happen if the government did regulate the industry, not about whether it will do so.
D It would be compatible with the argument to deny that the new assembly procedures would be more complex than the existing ones. Therefore, the argument does not require this answer option to be assumed as part of the argument.
E Correct. The argument is that none of the small companies can survive because none of the small companies can afford to convert to new government-imposed specifications. But this takes for granted that they will need to convert—which in turn presupposes that they do not currently meet the new specifications.

Choice B
May be it cost more but whether it's affordable or not we are not sure.
Also nothing related to cost is mentioned in the stimulus. Hence this makes the option as out of scope.
Right?

Answer choice B would make things nicer for the large companies, but it isn't necessary for the argument. The premise already tells us that the smaller companies cannot afford to make conversions. That doesn't necessarily tell us that the larger companies can afford to do this, but if they can, it's not necessarily because their costs would be lower. Quite likely, it would be because they are larger and have more funding available. Either way, we don't need to know. The author is trying to conclude that only the large companies can survive; it doesn't matter what the source of their advantage is.

That sounds about right. The passage tells us that, "none of the seven small companies can afford to convert their production lines to a new set of manufacturing specifications." That can be true regardless of whether (B) is assumed:

• Maybe the cost to convert is the same for both small and large companies, but only the larger companies can afford that cost.
• Maybe it even costs less for smaller companies than for a larger company -- but if the larger companies are able to afford the higher cost while the smaller companies are unable to afford the lower cost, then the argument still holds up.

The argument works regardless of whether (B) is assumed, so (B) is not a required assumption.

I hope that helps a bit!

Understanding the argument -
Three large companies and seven small companies currently manufacture a product with potential military applications. - Fact
If the government regulates the industry, it will institute a single set of manufacturing specifications to which all ten companies will have to adhere. - Conditional. Premise.
In this case, therefore, since none of the seven small companies can afford to convert their production lines to a new set of manufacturing specifications, only the three large companies will be able to remain in business. - Premise + Conclusion

We need to find the minimum condition or the missing premise for the conclusion to hold, which is "only the three large companies will be able to remain in business."

Option Elimination -

(A) None of the three large companies will go out of business if the government does not regulate the manufacture of the product. - It is introducing another conditional "if the government does not regulate" but we are talking about a conditional "If the government regulates." Distortion.

(B) It would cost more to convert the production lines of the small companies to a new set of manufacturing specifications than it would to convert the production lines of the large companies. - Ok. Say, for the small company, it took $100 million more. So what? Can they still survive if nothing in the option says they can't survive because of this cost? So, at best, it's weakener.

(C) Industry lobbyists will be unable to dissuade the government from regulating the industry. - Out of scope.

(D) Assembly of the product produced according to government manufacturing specifications would be more complex than current assembly procedures. - So what? Out of scope.

(E) None of the seven small companies currently manufactures the product to a set of specifications that would match those the government would institute if the industry were to be regulated. - ok. if we negate it, "some of the seven small companies currently manufacture the products to a new set of specifications," then this option shatters the conclusion.