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CR - Country X imposes heavy tariffs

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by SubratGmat2011 » Tue Sep 28, 2010 9:08 am
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?
"¢ Company Y will be able to obtain all the necessary permits to open a factory in Country X.
"¢ Company Y currently produces no goods outside its home country.
"¢ A sustainable market for Company Y's goods currently exists in Country X.
"¢ Company Y's home country does not impose tariffs on imported goods.
"¢ Labor costs in Country X are lower than those in Company Y's home country.
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by ricka343 » Tue Sep 28, 2010 9:21 am
E is the answer
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by g000fy » Tue Sep 28, 2010 9:39 am
I pick C. If Y currently exports it is pretty obvious there's a market for its goods in X and Y therefore is keen on setting up a factory over there to minimize revenue lost due to import duties.
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by g000fy » Tue Sep 28, 2010 9:47 am
ricka343 wrote:E is the answer
Negate E to see if it weakens the statement that company Y can increase its profits by opening a factory in X.

Labor costs in Country X are not lower than those in Company Y's home country

Therefore, labor costs can be same as those in Y's home country or higher than those in Y's home country

So, both the cases should weaken the statement.

1. Labor costs are same, import duties are less, profit increase possible. Hence, doesn't weaken.
2. Labor costs are high, import duties are high, profit increase may or may not be possible. Hence, doesn't weaken
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by lokesh r » Tue Sep 28, 2010 2:36 pm
SubratGmat2011 wrote: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?
"¢ Company Y will be able to obtain all the necessary permits to open a factory in Country X.
"¢ Company Y currently produces no goods outside its home country.
"¢ A sustainable market for Company Y's goods currently exists in Country X.
"¢ Company Y's home country does not impose tariffs on imported goods.
"¢ Labor costs in Country X are lower than those in Company Y's home country.
IMO C..

If company hasn't got sustainable market in country..it might not make much profit, which is the objective behind the idea of setting manufacturing plant in country x.

OA plz...
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by goyalsau » Tue Sep 28, 2010 9:03 pm
I messed it all
But after reading goofy and lokesh explanation, I think answer should be C,
I will be surprised if the OA is not C.
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by diebeatsthegmat » Wed Sep 29, 2010 8:33 am
SubratGmat2011 wrote: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?
"¢ Company Y will be able to obtain all the necessary permits to open a factory in Country X.
"¢ Company Y currently produces no goods outside its home country.
"¢ A sustainable market for Company Y's goods currently exists in Country X.
"¢ Company Y's home country does not impose tariffs on imported goods.
"¢ Labor costs in Country X are lower than those in Company Y's home country.
i will choose C as the answer
country Y wanted to open a factory in country X maybe because it exports products to to sell in country X and each time it export, there's a kind of import-tax which is hella high in X
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by vishalj » Wed Sep 29, 2010 11:26 am
I chose both C and E. However, I will E.

Conclusion : The company has determined ( or, plainly, the plan will succeed)

Premise : Country X imposes heavy tariffs on imported manufactured goods.

Premise : Country Y 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.

This argument is assuming that the cost of manufacturing in country Y is either less or equal to that of manufacturing in X.The tarriff imposition is basically increases the cost advantage. So the plan will work only if the company has some other cost advantage. E is supplying the proper assumption.

The problem with C is that it has used the adverb "currently", the plan is made for "long term".
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by ricka343 » Wed Sep 29, 2010 6:35 pm
Plan is to increase profit by manufacturing goods in county X instead of exporting from y.

If labour charges are higher in county X it is surely not going to help increase the profit .Besides i dont agree with C as it is stated in argument itself currently Y produces goods for sale in X.

Hence E still remains my choice for the correct answer
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by Yanat » Tue Oct 05, 2010 7:52 am
IMO it is C i.e. "¢ A sustainable market for Company Y's goods currently exists in Country X.

Profits depend on the demand for goods. As many have mentioned E as their choice, I feel its a bit out of choice. Labor costs in general is what is mentioned here and not the labor cost for manufacturing the goods that is mentioned in the premise.
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by bubbliiiiiiii » Tue Oct 05, 2010 10:32 pm
My pick is E - since labour cost is one of the major factor among manufacturing costs company Y should be clear about it.


As I see, many friends have also picked C, I could not understand why C?

I agree that sustainable market should be available for Company Y's products .. but since the stimulus says that the company Y's products already have market in country X, this implies that market is already sustaining for that product in country X.
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by rooster » Fri Oct 15, 2010 1:55 am
SubratGmat2011 wrote: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?
"¢ Company Y will be able to obtain all the necessary permits to open a factory in Country X.
"¢ Company Y currently produces no goods outside its home country.
"¢ A sustainable market for Company Y's goods currently exists in Country X.
"¢ Company Y's home country does not impose tariffs on imported goods.
"¢ Labor costs in Country X are lower than those in Company Y's home country.
Why wouldn't the assumption be A? If Company Y cannot open up the factory in Country X, wouldn't it make the cause useless?

For C, why would a sustainable market be relevant to profit? And for E, even if labor costs might be higher, what if resources are cheaper. If the high tariff were removed, this might be enough to offset those costs.

IMO it's obviously A, bc nothing could get started if you aren't permitted as a foreigner.
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by nafiul9090 » Fri Sep 09, 2011 9:33 pm
how do i eliminate option A?? help needed
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by gunjan1208 » Fri Sep 09, 2011 10:18 pm
I pick C

The question mentions that company is thinking of long term....and this long term requires a sustainable market.

What is OA?

Gunjan
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by gmatclubmember » Sat Sep 10, 2011 10:45 pm
My pick would be E.
The argument only talks about the cost factor (high import duties etc). So if the labour costs are high in country X it would make the products expensive as the high import duties were doing.
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