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# USA automotive companies are having a difficult time competing with

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Retired Moderator
Joined: 19 Mar 2014
Posts: 974
Location: India
Concentration: Finance, Entrepreneurship
GPA: 3.5
USA automotive companies are having a difficult time competing with [#permalink]

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16 Sep 2017, 00:43
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Difficulty:

15% (low)

Question Stats:

86% (00:47) correct 14% (00:48) wrong based on 42 sessions

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USA automotive companies are having a difficult time competing with car manufacturers in South Korea. USA manufacturers have decided that they must significantly lower the wages of their employees in order to compete with Korean manufacturers, because wages constitute approximately 30% of the cost of producing an automobile.

Which of the following, if true, provides the most compelling argument against lowering wages?

A] Lowering wages will cause the best workers to leave, lowering quality of the final product, which could lower sales.

B] Raw materials, such as steel, constitute 55% of the cost of an automobile.

C] US automakers have recently made inroads on foreign manufacturers and recaptured market share.

D] U.S. worker's wages are 25% higher than those of workers in South Korea.

E] U.S auto manufacturers recently increased their spending on advertising.

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Joined: 15 Feb 2017
Posts: 80
Re: USA automotive companies are having a difficult time competing with [#permalink]

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16 Sep 2017, 01:49
USA automotive companies are having a difficult time competing with car manufacturers in South Korea. USA manufacturers have decided that they must significantly lower the wages of their employees in order to compete with Korean manufacturers, because wages constitute approximately 30% of the cost of producing an automobile.
The answer is A.Wages constitute a large part of the cost of producing an automobile. So the author argues that employee wages should be reduced to maximize the profits accruing from car production in USA in order to compete with South Korea.But if lowering the wages causes the best workers to leave car sales could be hurt thus causing a shortfall in car manufacturing.So wages should not be reduced.Please give me kudos. I need them badly to increase my score.
Re: USA automotive companies are having a difficult time competing with   [#permalink] 16 Sep 2017, 01:49
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# USA automotive companies are having a difficult time competing with

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