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700-800 level questions from MGMAT

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700-800 level questions from MGMAT

by thephoenix » Mon Feb 01, 2010 1:22 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?

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.

pls give sound reasoning for correct and wrng ones
OA to follow soon
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by Lance123 » Mon Feb 01, 2010 1:38 am
I'll take a crack at it and say C.

The words ''profit in the long term'' hints that this answer is the best one.


I had a difficult choice with this one as I was also leaning to A.
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by komal » Mon Feb 01, 2010 1:57 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?

a)Company Y will be able to obtain all the necessary permits to open a factory in Country X.
Incorrect : Irrelevant. Obtaining all the necessary permits in country x will not necessarily impact company y's long term profit.

b)Company Y currently produces no goods outside its home country.
Incorrect : Out of scope. Even if company Y produces no goods outside its home country, it does not impact its decision to open a factory in country X

c)A sustainable market for Company Y's goods currently exists in Country X.
Correct : For company Y to increase its profit in the long term it becomes necessary for company Y to have continued/sustained market in country X.

d)Company Y's home country does not impose tariffs on imported goods.
Incorrect : It does not impact company Y's decision to open a factory in country Y in order to increase profit in the long run.

e)Labor costs in Country X are lower than those in Company Y's home country.
Incorrect : Labor costs alone is not a determining factor in a company's overall profitability.
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by thephoenix » Mon Feb 01, 2010 2:20 am
komal wrote: e)Labor costs in Country X are lower than those in Company Y's home country.
Incorrect : Labor costs alone is not a determining factor in a company's overall profitability.
thanks i was looking for this
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by komal » Mon Feb 01, 2010 2:31 am
thephoenix wrote:
thanks i was looking for this

ur welcome : )
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by vijay_venky » Tue Feb 02, 2010 2:36 am
I have a doubt with C.
It is talking about the current status of the market, and if I use the negation, to find out the right option, I will end up with negative C as

A sustainable market for Company Y's goods does not exist in Country X(currently).

Would it be as relevant to the argument as

Company Y will not be able to obtain all the necessary permits to open a factory in Country X. (Negative A)

while A makes the opening of a factory itself impossible, C says the sustainable market does not exist at present.

Could somebody shed some light in this??
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by Osirus@VeritasPrep » Tue Feb 02, 2010 7:20 am
This is why I think Manhattan GMAT does a poor job with their critical reasoning questions. In C, one does not have to assume that there is already a market for the products in order for the conclusion that profitability will increase by opening a plant in Country X. This is not a necessary part of the argument. Profitability will increase regardless of if there is a market or not just by not having to pay the tariffs. With every other option, none of those are necessary elements of the argument either. I would discard this question, because Manhattan's logic is off with this one.
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