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Re: To protect certain fledgling industries, the government of country Z b [#permalink]
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Understanding the Passage


To protect certain fledgling industries, the government of country Z banned imports of the types of products those industries were starting to make.

The govt. of Z did something to protect certain fledgling industries.

What did it do?

Banned imports of the types of products those industries were starting to make.

(How would doing so protect those industries?

By banning those imports, you have eliminated foreign competition for these companies.

Thus, domestic customers will have to buy from these fledgling domestic industries. As a result, these fledgling industries will have more customers than they would have had if the imports had not been banned.)

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.

As a result of this ban, the cost of those products to the buyers increased.

Who were these buyers?

Several export-dependent industries

This cost increase severely restricted these export-dependent industries’ ability to compete effectively in their export markets.

(How did this cost increase restrict these industries’ ability to compete?

If the input cost increases, a company will perhaps increase the output cost. As a result, its products will perhaps become more expensive than its competitors’ products. Thus, its ability to compete will go down.)


Understanding the Question Stem



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

The question asks us to find from the option a conclusion about Z’s adversely affected export-dependent industries that is best supported by the passage.

In other words, we’re looking for a conclusion best supported by the passage. The conclusion has to be about Z’s adversely affected export-dependent industries.

Thus, we’ll take the statements in the passage as facts and evaluate which option can be concluded from those statements.


The Evaluation



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

Correct. It’s quite easy to reject this option by saying that the passage doesn’t give us any information about the profit margins of these industries.

Many people look at just one or two words in an option and reject the option saying, “The passage nowhere talks about these things. Out!”

As the current case suggests, this way of rejecting options is flawed. You may be following this strategy in many cases and getting by. If so, it may be hard for you to accept that this way of reasoning is flawed.

You’re perhaps wondering, “If this way is flawed, why does it work most of the time?”

This way of reasoning works most of the time because 80% of the options in a CR question are incorrect (i.e., 4 out of 5 options are incorrect). Thus, even if you have flawed reasoning to reject the options, you will get by a lot of time.

****

Now, let’s try to understand why this option is correct.

You may realize that this option is a negative statement; it says that something is not the case.

It says that profit margins were not high enough to absorb the rise in costs mentioned above.

To reject an option in an inference question, you need to be sure that the negation of the option is possible.

Only then can you say that this option cannot be concluded or inferred (because the negation is also possible)

What would be the negation of this statement?

The negation will be:

Profit margins in those industries were high enough to absorb the rise in costs mentioned above.

Is the above case possible?

Is it possible that profit margins in those industries were high enough to absorb the rise in costs mentioned above?

No. It’s not possible, since we’re given that the increase in costs sharply limited the ability of these industries to compete effectively.

If the profit margins were high enough to absorb the rise in costs, the increase in costs will not have sharply limited the ability of these industries to compete effectively.

Since the opposite of this option is not possible, we can conclude this option from the given passage.

(B) Those industries had to contend with the fact that other countries banned imports from country Z.

Incorrect. I sense that some people mark this option thinking, “If country Z bans some imports from other countries, isn’t it logical to expect that other countries would also ban imports from country Z?”

I’ll agree that there is a chance that other countries would reciprocate. However, can we conclude this from the passage?

The answer is No. To conclude, we need not only indication but very strong support.

***

I believe that some people mark this option believing that it supports the final statement in the passage. If so, these people have misread the question - the question asks to find an option that is supported by the passage, NOT an option that supports the passage.

(C) Those industries succeeded in expanding the domestic market for their products.

Incorrect. There’s absolutely no indication that these industries expanded the domestic market for their products.

Of course, given that their ability to compete in the export markets is diminished, there is a chance that these industries would have wanted to expand in the domestic market.

However, we cannot conclude even the idea that these industries tried to expand the domestic market for their products. It is entirely possible that they continued to focus on the export markets.

(D) Steps to offset rising materials costs by decreasing labor costs were taken in those industries.

Incorrect. There’s absolutely no indication in the passage that such steps were taken. (If you marked option D, my hunch is that you had forgotten that you were solving an inference question)

Perhaps, no steps to offset rising material costs were taken.

Or, even if such steps were taken, the steps might not have included decreasing labor costs.

(E) Those industries started to move into export markets that they had previously judged unprofitable.

Incorrect. There’s absolutely no indication in the passage that these industries moved into any new export markets. Perhaps, they continued to focus on the existing markets - by improving their products or distribution, by changing their brand image, or by some cost-cutting.
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Re: To protect certain fledgling industries, the government of country Z b [#permalink]
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What I don't understand from the explaination was how do they know for sure the profit margin is not "high"? What if the cost of product rose in other countries as well? What if the companies sell at higher price but high quality products therefore the profit margin is still as high as before? You know what I go about this!! There is no guarantee at all about profit here reguarding to the cost if we don't contribute to other factors. Therefore, this cannot be a conclusion. What do you think? This is question 95 from OG by the way.


Well, first of all I would say that their response is by far the BEST response of the bunch, so it's clearly the right one. You make good points, but don't argue for any of the other responses. To answer your questions...
1. it doesn't matter if the profit margins were high or not, they weren't high enough to absorb the additional costs or their ability to compete wouldn't have been affected.
2. Again, it doesn't matter if the prices rose in other countries, because the question TELLS you that the company in question had a limited ability to compete.

I think, generally, you are missing the fact that we are told that the export-dependent firm's ability to compete was severely limited. This tells you that they incurred problems due to newly expensive inputs. All of your recovery schemes allow them to not incur problems, but we already know that they did. I hope that makes sense.
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Re: To protect certain fledgling industries, the government of country Z b [#permalink]
I have a doubt in option B. We need to prove that export industry was adversely affected. Option B proves that just as well as A. If other countries ban country Z's exports, the export company will be impacted adversely.
Any explanation to my query pls .
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Re: To protect certain fledgling industries, the government of country Z b [#permalink]
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mjmhtjain wrote:
I have a doubt in option B. We need to prove that export industry was adversely affected. Option B proves that just as well as A. If other countries ban country Z's exports, the export company will be impacted adversely.
Any explanation to my query pls .


No, we do not "need to prove that export industry was adversely affected." The requirement is to find a statement that can be inferred from the passage (MUST BE TRUE kind). Option B MAY be one reason for the "adversely affected export-dependent industries ", but it is not necessary that the statement MUST be true (from the facts given in the passage). A ban by other countries cannot be concluded from the passage.
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Re: To protect certain fledgling industries, the government of country Z b [#permalink]
chetan2u
could you pls explain the answer using numbers? Thank you
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Re: To protect certain fledgling industries, the government of country Z b [#permalink]
Is it talking about raw material and final product kind of business? I understood it as lets say country A has mobile manufacturing companies so it has banned import of mobiles , if so how price of mobile is increased considering option A as right answer choice?

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Re: To protect certain fledgling industries, the government of country Z b [#permalink]
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gmat4varun wrote:
Is it talking about raw material and final product kind of business? I understood it as lets say country A has mobile manufacturing companies so it has banned import of mobiles , if so how price of mobile is increased considering option A as right answer choice?

Posted from my mobile device


Consider that group A consists of the industries that the government is protecting. Industry group A manufactures product aa. Another group of industry (say group B) buys aa and produces bb, which is then exported. (aa is the raw material and bb the finished product for B)

Banning import of aa increase the price of aa, in turn increasing the cost of producing bb and thereby reducing profit margin of the group B industries.
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Re: To protect certain fledgling industries, the government of country Z b [#permalink]
Thank you for your time.
I was able to understand by example where raw material and final product industry is associated.But does it only applicable in these type of cases? Do we have any clue that incates any relationship between two industries , one whose import was banned and the other one?

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Re: To protect certain fledgling industries, the government of country Z b [#permalink]
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gmat4varun wrote:
Thank you for your time.
I was able to understand by example where raw material and final product industry is associated.But does it only applicable in these type of cases? Do we have any clue that incates any relationship between two industries , one whose import was banned and the other one?

Posted from my mobile device


"As a direct result, the cost of those products to the buyers, several export-dependent industries in Z, went up"...this part explicitly states the relation between the two industries.
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Re: To protect certain fledgling industries, the government of country Z b [#permalink]
I agree with all the explanations given above, but can someone guide me as to why E is not the best answer here? I am hanging between A & E.
The premise states that " as a result.........................sharply limiting the ability of those industries to compete effectively in their export markets." Now, any company would logically try different markets, albeit they deemed those markets unprofitable at first.
Am i assuming too much?
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Re: To protect certain fledgling industries, the government of country Z b [#permalink]
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colorblind wrote:
I agree with all the explanations given above, but can someone guide me as to why E is not the best answer here? I am hanging between A & E.
The premise states that " as a result.........................sharply limiting the ability of those industries to compete effectively in their export markets." Now, any company would logically try different markets, albeit they deemed those markets unprofitable at first.
Am i assuming too much?



Nothing in the passage confirms that those industries actually moved to a different market. For a conclusion question a MUST TO BE TRUE condition should be satisfied. It is possible that those industries did not move to new markets.
Re: To protect certain fledgling industries, the government of country Z b [#permalink]
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).
Thanks in advanced __
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Re: To protect certain fledgling industries, the government of country Z b [#permalink]
Asad wrote:
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).
Thanks in advanced __


Hi Asad

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.
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Re: To protect certain fledgling industries, the government of country Z b [#permalink]
Dear AjiteshArun DmitryFarber VeritasKarishma IanStewart MartyTargetTestPrep GMATNinjaTwo GMATNinja VeritasPrepBrian GMATGuruNY,

Q1. Why is choice A. correct? The passage does not even mention about the profit at all.

Q2. Why is choice D. wrong?

According to the passage:
Quote:
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.

Before those industries claim that they are unable to compete in export markets, shouldn't they help themselves first by taking mitigating measures to offset the rising cost?
It's like they are saying they can't compete when they do not even try to reduce their own controllable internal costs.
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Re: To protect certain fledgling industries, the government of country Z b [#permalink]
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varotkorn wrote:
Q1. Why is choice A. correct? The passage does not even mention about the profit at all.


An inference is a statement that MUST BE TRUE, given the information in the passage.
Apply the NEGATION TEST.
When the correct answer is negated, the passage will be contradicted.

A, negated:
Profit margins in those industries were high enough to absorb the rise in costs.
Implication:
The rise in costs did not limit the ability of those industries to compete -- contradicting the following information in the passage:
The cost...went up, sharply limiting the ability of those industries to compete.
Since the negation of A contradicts the passage, A is a valid inference: a statement that MUST BE TRUE, given the information in the passage.



Quote:
Q2. Why is choice D. wrong?


D: Steps to offset rising materials costs by decreasing labor costs were taken in those industries.

The passage offers no information about whether companies attempted to decrease labor costs.
Eliminate D.
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Re: To protect certain fledgling industries, the government of country Z b [#permalink]
GMATGuruNY wrote:
D: Steps to offset rising materials costs by decreasing labor costs were taken in those industries.

The passage offers no information about whether companies attempted to decrease labor costs.
Eliminate D.


Dear GMATGuruNY,

The negated choice D. says:
D: Steps to offset rising materials costs by decreasing labor costs were NOT taken in those industries.

In light of negated choice D., the ability of those industries to compete effectively in their export markets may not be limited, which is somewhat against the last sentence in the passage. They did not take steps of reduce their costs.
Instead, if industries took the steps, they may regain the competitiveness.

Why is my thinking wrong here?
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Re: To protect certain fledgling industries, the government of country Z b [#permalink]
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varotkorn wrote:
GMATGuruNY wrote:
D: Steps to offset rising materials costs by decreasing labor costs were taken in those industries.

The passage offers no information about whether companies attempted to decrease labor costs.
Eliminate D.


Dear GMATGuruNY,

The negated choice D. says:
D: Steps to offset rising materials costs by decreasing labor costs were NOT taken in those industries.

In light of negated choice D., the ability of those industries to compete effectively in their export markets may not be limited, which is somewhat against the last sentence in the passage.
Instead, if industries took the steps, they may regain the competitiveness.

Why is my thinking wrong here?


D, negated:
Steps to offset rising materials costs by decreasing labor costs were NOT taken in those industries.
Here, the affected industries did not attempt to reduce labor costs.
This negation SUPPORTS the passage, helping to explain why -- according to the passage -- the affected industries lost the ability to compete.
Since the correct negation must CONTRADICT the passage, eliminate D.
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