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# To protect certain fledgling industries, the government of country Z b

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SVP
Joined: 23 Feb 2015
Posts: 1571
Re: To protect certain fledgling industries, the government of country Z b  [#permalink]

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02 Jan 2020, 10:39
Quote:
To protect certain fledgling industries, the government of country Z banned imports of the types of products those industries were starting to make. As a direct result, the cost of those products to the buyers, several export-dependent industries in Z, went up, sharply limiting the ability of those industries to compete effectively in their export markets.

Which of the following conclusions about country Z's adversely affected export-dependent industries is best supported by the passage?

(A) Profit margins in those industries were not high enough to absorb the rise in costs mentioned above.

Hello,
my honorable expert,
RonPurewal, MartyTargetTestPrep, AjiteshArun, ccooley, DmitryFarber, GMATNinja, egmat, generis, VeritasKarishma, MentorTutoring

Q1:
what if the correct choice is changed like below?

Possible choice:
(A1) Liquid money in those industries (export-dependent industries) were not high enough to absorb the rise in costs mentioned above.
(A2) Loan from the banks in those industries (export-dependent industries) were not high enough to absorb the rise in costs mentioned above.

Are the choice A1 and A2 still legit choice?

Q2:
In the passage, the author did not introduce the "fledgling industries" at all. Is the "fledgling industries" import-dependent industries or export-dependent industries?
So, how do someone convinced that the author did not mention/indicate the "fledgling industries" by saying those industries (underlined part in the passage).
CrackVerbal Representative
Joined: 01 Mar 2019
Posts: 95
Re: To protect certain fledgling industries, the government of country Z b  [#permalink]

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02 Jan 2020, 22:37
Quote:
To protect certain fledgling industries, the government of country Z banned imports of the types of products those industries were starting to make. As a direct result, the cost of those products to the buyers, several export-dependent industries in Z, went up, sharply limiting the ability of those industries to compete effectively in their export markets.

Which of the following conclusions about country Z's adversely affected export-dependent industries is best supported by the passage?

(A) Profit margins in those industries were not high enough to absorb the rise in costs mentioned above.

Hello,
my honorable expert,
RonPurewal, MartyTargetTestPrep, AjiteshArun, ccooley, DmitryFarber, GMATNinja, egmat, generis, VeritasKarishma, MentorTutoring

Q1:
what if the correct choice is changed like below?

Possible choice:
(A1) Liquid money in those industries (export-dependent industries) were not high enough to absorb the rise in costs mentioned above.
(A2) Loan from the banks in those industries (export-dependent industries) were not high enough to absorb the rise in costs mentioned above.

Are the choice A1 and A2 still legit choice?

Q2:
In the passage, the author did not introduce the "fledgling industries" at all. Is the "fledgling industries" import-dependent industries or export-dependent industries?
So, how do someone convinced that the author did not mention/indicate the "fledgling industries" by saying those industries (underlined part in the passage).

Let me try to address the two questions you have raised.

Q1: The logic behind answer option (A) is that if there is an increase in the price of inputs, an industry/company has 2 options:

- Absorb the price increase internally by taking a hit on profit margins. This requires the company to have some cushion in terms of profit margins.
- Pass on the input price increase to its customers by increasing the prices of its products. This would make the industry/company less attractive to its customers.

As per the options you have stated:

(A1) Liquid money in those industries (export-dependent industries) were not high enough to absorb the rise in costs mentioned above. This would impact the ability of the industry to be in operation at all, not just its competitiveness in its export markets. Hence I would say that this option suggests an impact far greater than that described in the passage.

(A2) Loan from the banks in those industries (export-dependent industries) were not high enough to absorb the rise in costs mentioned above. Rise in input costs cannot be absorbed by just loans, as these loans will have to be repaid. Loans must be accompanied by an ability to increase prices to its customers as well. This option does not say anything about that. Hence I would say that this option is not directly supported by the information given in the passage.

Q2:

Quote:
In the passage, the author did not introduce the "fledgling industries" at all. Is the "fledgling industries" import-dependent industries or export-dependent industries?

We do not know whether the "fledgling industries" mentioned in the passage are dependent on imports for their inputs or exports for their markets. However, this is not a point which is essential to the message being given by the passage and does not impact the conclusion.

Quote:
So, how do someone convinced that the author did not mention/indicate the "fledgling industries" by saying those industries (underlined part in the passage).

The underlined portion appears in a part of the passage where the author is talking about the impact of the import ban on the export dependent industries. The earlier clause states "the cost of those products to the buyers, several export-dependent industries in Z, went up, sharply". The following -ing modifier would hence apply to this clause, which would imply that the ability to compete was limited in the industries which were the buyers of "those products".

Hope this helps.
_________________
Re: To protect certain fledgling industries, the government of country Z b   [#permalink] 02 Jan 2020, 22:37

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