Tarrifs

[goelmohit2002]

Hi All,

In the below question, OA = C. Can someone please tell why C is better then A ? IMO A looks equally good...if a person will not get the license....how will he make profits....so the same comes during the planning process only....isn't it ?

Country X imposes heavy tariffs on imported manufactured goods. Company Y has determined that it could increase its profits in the long term by opening a factory in Country X to manufacture the goods that it currently produces in its home country for sale in Country X.

For Company Y's determination to be true, which of the following assumptions must also be true?

a Company Y will be able to obtain all the necessary permits to open a factory in Country X.
b Company Y currently produces no goods outside its home country.
c A sustainable market for Company Y's goods currently exists in Country X.
d Company Y's home country does not impose tariffs on imported goods.
e Labor costs in Country X are lower than those in Company Y's home country.

[RonPurewal]

Hi All,

In the below question, OA = C. Can someone please tell why C is better then A ? IMO A looks equally good...if a person will not get the license....how will he make profits....so the same comes during the planning process only....isn't it ?

Country X imposes heavy tariffs on imported manufactured goods. Company Y has determined that it could increase its profits in the long term by opening a factory in Country X to manufacture the goods that it currently produces in its home country for sale in Country X.

For Company Y's determination to be true, which of the following assumptions must also be true?

a Company Y will be able to obtain all the necessary permits to open a factory in Country X.
b Company Y currently produces no goods outside its home country.
c A sustainable market for Company Y's goods currently exists in Country X.
d Company Y's home country does not impose tariffs on imported goods.
e Labor costs in Country X are lower than those in Company Y's home country.

hhmmm. this is an interesting question.

TECHNICALLY, no, you don't actually have to assume that company Y can get the permits. granted, the argument would be totally pointless if company Y couldn't get the permits, but you still don't have to make this assumption.

weirdly enough, here's the takeaway:
if you have an argument of the form "If X, then Y", you don't actually have to assume that X is possible!

i know this sounds hard to believe, so let me give you an example.
let's say i give you the following argument:
i am 6'1" tall. if i grew to be 7'2" tall, then little kids would think i was more awesome.
CORRECT ASSUMPTION: little kids think people who are 7'2" tall are more awesome than people who are 6'1" tall.
INCORRECT ASSUMPTION: i can actually grow to be 7'2" tall.

for the same reasons that this assumption (i can actually grow to be 7'2") is incorrect, choice (a) is incorrect.

--

HOWEVER,
i'm not sure whether the gmat would actually do this, and i'm leaning toward thinking that they won't. the reason is that arguments that DON'T make these types of assumptions (even though, technically, they aren't necessary) are purely hypothetical and have no practical value.

i will suggest some editing of this problem. thanks!

[duyng9989]

Hi All,

In the below question, OA = C. Can someone please tell why C is better then A ? IMO A looks equally good...if a person will not get the license....how will he make profits....so the same comes during the planning process only....isn't it ?

Country X imposes heavy tariffs on imported manufactured goods. Company Y has determined that it could increase its profits in the long term by opening a factory in Country X to manufacture the goods that it currently produces in its home country for sale in Country X.

For Company Y's determination to be true, which of the following assumptions must also be true?

a Company Y will be able to obtain all the necessary permits to open a factory in Country X.
b Company Y currently produces no goods outside its home country.
c A sustainable market for Company Y's goods currently exists in Country X.
d Company Y's home country does not impose tariffs on imported goods.
e Labor costs in Country X are lower than those in Company Y's home country.

hhmmm. this is an interesting question.

TECHNICALLY, no, you don't actually have to assume that company Y can get the permits. granted, the argument would be totally pointless if company Y couldn't get the permits, but you still don't have to make this assumption.

weirdly enough, here's the takeaway:
if you have an argument of the form "If X, then Y", you don't actually have to assume that X is possible!

i know this sounds hard to believe, so let me give you an example.
let's say i give you the following argument:
i am 6'1" tall. if i grew to be 7'2" tall, then little kids would think i was more awesome.
CORRECT ASSUMPTION: little kids think people who are 7'2" tall are more awesome than people who are 6'1" tall.
INCORRECT ASSUMPTION: i can actually grow to be 7'2" tall.

for the same reasons that this assumption (i can actually grow to be 7'2") is incorrect, choice (a) is incorrect.

--

HOWEVER,
i'm not sure whether the gmat would actually do this, and i'm leaning toward thinking that they won't. the reason is that arguments that DON'T make these types of assumptions (even though, technically, they aren't necessary) are purely hypothetical and have no practical value.

i will suggest some editing of this problem. thanks!

Hi Ron:

Can you please check the question:
Bank Depositors in the United States are all financially protected against bank failure because the government insures all individuals' bank deposits. An economist argues that this insurance is partly responsible for the high rate bank failures, since it removes from the depositors any financial incentive to find out whether the bank that holds their money is secure against failure. If depositors were more selective, then banks would need to be secure in order to compete for depositor's money.

The economist argument makes which of the following assumptions?

(A) Bank failures are caused when big borrowers default on loan repayments.
(B) A significant proportion of depositors maintain accounts at several different banks.
(C) The more a depositor has to deposit, the more careful he or she tends to be in selecting a bank
(D) The difference in the interest rates paid to the depositors by different banks is not a significant factor in bank failures.
(E) Potential depositors are able to determine which banks are secure against failure.

OA: E

(Question discussed in here bank-depositors-in-the-united-states-are-all-financially-t620.html)

The question is IF A then B question. THe assumption is still A is feasible.

I am very doubt about the assumption issue here. This question is official from GMAC. It makes me very doubtful about the question we are discussion in this thread. :(

Thanks

[jlucero]

This is close to what Ron said would not happen, but there's one very subtle difference- the economist isn't arguing that banks would need to be secure if depositors were more selective. He/she is arguing that the insurance is responsible for high rates of bank failures. The if/then statement is his/her rationale for that opinion. So we are not attacking the conclusion, we are attacking whether his/her premise is feasible.

[chetan86]

Hi,

Company Y is making a prediction "that it could increase its profits in the long term by opening a factory in Country X to manufacture the goods".

Option C should not say something like - A sustainable market for Company Y's goods WILL REMAIN (instead of currently exists) in Country X?

What if the market for company Y will not exist in future? What if Country X itself start creating the same product in cheaper rate?

Could you please guide?

[RonPurewal]

think about the meaning of the word "sustainable".

[chetan86]

think about the meaning of the word "sustainable".

Hi Ron,

Thanks a lot for your prompt reply.
I understood my mistake. :)

Thanks!!

[RonPurewal]

you're welcome.