In order to protect its domestic sugar cane growers, the government of

Question

In order to protect its domestic sugar cane growers, the government of Country X decided to impose a steep tax on all imported cane juice, which is used a sweetener. As a direct result of this tax, the price of cane juice in Country X rose sharply. After the tax was imposed, all the country's soft drink companies, which had before used cane juice as a sweetener in their drinks, switched to another sweetener, high fructose corn syrup, in order to maintain their cost structures.

Which of the following can be most properly inferred from the passage above?

A. The amount of cane juice required to sweeten one soft drink cost approximately the same as the amount of high fructose corn syrup required to sweeten one soft drink prior to the imposition of the cane juice import tax.

B. Soft drink companies in Country X hoped to sell their products in the same countries that were traditionally known to export cane juice to Country X.

C. The number of sugar cane growers in Country X increased after the imposition of the import tax on cane juice in Country X.

D. Soft drink companies in Country X had considered a switch from cane juice to high fructose corn syrup prior to the decision by the government of Country X to impose the tax on all imported cane juice.

E. The amount of cane juice imported by Country X exceeded the amount produced domestically prior to the imposition of import taxes by the government of Country X.

chetan2u · Answer

Hi,
you are requested to follow guidelines for posting your Q..
1) All the choices be marked as A,B...
2) OA to be provided

SOLUTION:-

lets rephrase the para--
Country X imposed taxes on imported juice to help domestic growers. But the products requiring this juice as sweetener have shifted to another form of sweetener to maintain COST structure..

choices:-
 
 The amount of cane juice required to sweeten one soft drink cost approximately the same as the amount of high fructose corn syrup required to sweeten one soft drink prior to the imposition of the cane juice import tax.
 it is given that changeover in two has been done to maintain the COST structure, so we can infer that the two must be nearly same.. CORRECT

Soft drink companies in Country X hoped to sell their products in the same countries that were traditionally known to export cane juice to Country X.
 the para nowhere touches this aspect.. incorrect

The number of sugar cane growers in Country X increased after the imposition of the import tax on cane juice in Country X.
  nothig again in para which can point towards this.. Out of context

Soft drink companies in Country X had considered a switch from cane juice to high fructose corn syrup prior to the decision by the government of Country X to impose the tax on all imported cane juice.
 we cannot infer this. what the companies thought earlier is out of context

The amount of cane juice imported by Country X exceeded the amount produced domestically prior to the imposition of import taxes by the government of Country X.
 Agaim out of context   
 
ans A

plogod · Answer

My problem with A is that the corn syrup may have been more expensive than the sugar pre import-tax. How can we just assume they are nearly the same?

Posted from my mobile device

Abhishek009 · Answer

Lets explore option (A)

Let Price of sugar cane juice prior to imposition of taxes be $10/unit
Quantity required for production of one soft drink be 5 units
So, prior to imposition of taxes cost of production of one soft drink using sugar cane juice is $ 50

Government imposes say 10% tax (say)

Price of sugar cane juice after imposition of taxes will be $11/unit
Quantity required for production of one soft drink be 5 units
So, prior to imposition of taxes cost of production of one soft drink using sugar cane juice is $ 55

Here I assume 2 things -

1. Quantity of syrup required for production of one soft drink doesn't change. 
 2. Cost of sugar cane per unit will be at most equal to the cost of sugar cane juice prior to imposition of tax.
  
Cost of corn syrup prior to imposition of taxes be $10/unit
Quantity required for production of one soft drink be 5 units
So, prior to imposition of taxes cost of production of one soft drink using sugar cane juice is $ 50

Now go to option (A) once again -

Check carefully this clearly matches our assumptions highlighted in red and blue above, hence (A) is correct.

Now the last part , your query -

My problem with A is that the  corn syrup may have been more expensive than the sugar pre import-tax.   How can we just assume they are nearly the same?

The stimulus states -

If we assume that cost of corn syrup is more expensive than more expensive than the sugar pre import-tax, then the soft drink companies would not be able to maintain their cost structures same and the entire argument of switching to corn sugar from sugar cane juice falls apart.

Hope this helps, please feel free to revert in case of any doubt.

plogod · Answer

I originally figured the answer was (D) because if the companies switched ingredients right after the import tax was raised, they would had to have assumed they could use corn syrup as a substitute before the tax was in place. While possible, this is somewhat speculative.

Now that you highlight the "to maintain their cost structures" part, I can see why (A) makes sense. To keep the same cost structure, the price of the substitute product used per soft drink would need to equal the price of the original product used per soft drink.

Thanks!

Scuven · Answer

The reason A prevails over E is because in inference we have to support DIRECTLY the conclusion with the given premises. 
Thus we CAN'T MAKE ANY ASSUMPTION in addition to what is provided.

E to be true needs the assumption that price increase is due to the offer (represented by import and internal production) reduction and not to demand increase.

A instead is DIRECTLY supported by premises

Vasu49 · Answer

In A:
What if corn syrup was way expensive than cane juice prior to the imposition of tax and the tax increased the cost of cane juice significantly such that it exceeded the cost of corn syrup. It is possible that the companies can maintain their costs by using the corn syrup since no information regarding it is given in the argument. Maybe, before the imposition of taxes, companies used cane juice just because of its low price. They could have maintained their costs if they used corn syrup.

Am I missing something here?

saby1410 · Answer

KarishmaB 
whenever in the stimulus it says to maintain cost it means the same cost as previous cost.
Also can you give reasoning for option E

KarishmaB · Answer

Argument: Country X imposed a steep tax on all imported cane juice. Price of cane juice in Country X rose sharply. So soft drink companies, which had before used cane juice as a sweetener in their drinks, switched to high fructose corn syrup in order to maintain their cost structures. This means that the soft drink companies, to maintain the same cost of producing soft drinks as before, switched to fructose corn syrup. Then it implies that the cost of making soft drinks did not rise by switching to high fructose corn syrup. So the amount of money required to buy cane juice for each soft drink was the same as the amount to money required to buy high fructose corn syrup for each soft drink. Hence option (A) works. A. The amount of cane juice required to sweeten one soft drink cost approximately the same as the amount of high fructose corn syrup required to sweeten one soft drink prior to the imposition of the cane juice import tax. Correct. E. The amount of cane juice imported by Country X exceeded the amount produced domestically prior to the imposition of import taxes by the government of Country X. Not necessary that the amount imported was higher than domestic production. Say, before tax, domestically 50 million litres of cane juice was produced and 30 million was imported. So the country consumed 80 million litres of cane juice. After tax, the 30 million litres became very expensive. So shortage happened. Domestic farmers raised their prices too. The end result was that the price of cane juice increased sharply. Hence these numbers are consistent with our argument. Is it necessary that if 50 million litres was produced domestically, more than that must have been imported previously? No. Check out another inference question here: https://youtu.be/0uqq17WCJiE

saby1410 · Answer

Thanks alot Karishma.Your explainations are very good.

rak08 · Answer

KarishmaB

Can you resolve this discrepancy for me

the amount of corn syrup = cane juice (qty)
the price isn't the same.
the gap in price can be higher than the gap post tax. 
how can we assume this?

KarishmaB · Answer

The amount is not the same. Option (A) says that the money needed to buy the amount necessary for one soft drink is the same in both cases.
Say we needed 10 ml of cane juice for one soft drink and it cost $1 before taxes but now costs $2.
Say we need 100 ml of high fructose for one soft drink. Since they switched from cane juice to high fructose and the price remained the same, it means that the price of 100 ml of high fructose now must be $1. This is what (A) says.

In order to protect its domestic sugar cane growers, the government of

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