[MGMAT][Assump] Did not like the OA

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HSPA: Legendary Member; Posts: 1101; Joined: Fri Jan 28, 2011 7:26 amFollowed by: 13 members; Thanked: 47 times; GMAT Score:640

by HSPA » Sat Jul 16, 2011 2:29 am

Consider only 3 options A/C/E.. please explain what is wrong with E

Country X imposes heavy tariffs on imported manufactured goods. Company Y has determined that it couldincrease its profits in the long term by opening a factory in Country X to manufacture the goods that it currentlyproduces 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

First take: 640 (50M, 27V) - RC needs 300% improvement
Second take: coming soon..
Regards,
HSPA.

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Source: Beat The GMAT — Critical Reasoning | Sat Jul 16, 2011 2:29 am

sl750: Master | Next Rank: 500 Posts; Posts: 496; Joined: Tue Jun 07, 2011 5:34 amFollowed by: 1 member; Thanked: 38 times

by sl750 » Sat Jul 16, 2011 3:55 am

Choice C stands out because it clearly indicates that Country Y has to believe that it has a market
in Country X in order for it to do business there

Lower labor costs are irrelevant because even if it were true, without a sustainable market for Country Y's products in Country X it would not make good business sense to operate in Country X solely because the labor costs are lower in X than in Country Y

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HSPA: Legendary Member; Posts: 1101; Joined: Fri Jan 28, 2011 7:26 amFollowed by: 13 members; Thanked: 47 times; GMAT Score:640

by HSPA » Sat Jul 16, 2011 6:07 am

How did you eliminate E

sl750 wrote:Choice C stands out because it clearly indicates that Country Y has to believe that it has a market
in Country X in order for it to do business there

Lower labor costs are irrelevant because even if it were true, without a sustainable market for Country Y's products in Country X it would not make good business sense to operate in Country X solely because the labor costs are lower in X than in Country Y

First take: 640 (50M, 27V) - RC needs 300% improvement
Second take: coming soon..
Regards,
HSPA.

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gmat25: Master | Next Rank: 500 Posts; Posts: 189; Joined: Wed Jul 06, 2011 6:57 amFollowed by: 1 member; Thanked: 17 times

by gmat25 » Sat Jul 16, 2011 6:40 am

HSPA wrote:How did you eliminate E
sl750 wrote:Choice C stands out because it clearly indicates that Country Y has to believe that it has a market
in Country X in order for it to do business there

Lower labor costs are irrelevant because even if it were true, without a sustainable market for Country Y's products in Country X it would not make good business sense to operate in Country X solely because the labor costs are lower in X than in Country Y

Hi, Op E is wrong because it may or may not affect Company Y's determination...see Company Y's determination is to make profit by opening a factory in country X...now suppose labor costs in country X are not lower than those in country Y....here i actually negated the Op E okay...but still imagine if import tax is too high...for ex:

Labor cost in Y for 1 unit = 20

Labor cost in X for 1 unit = 30

Import tax on 1 unit = 20

so even if labor cost is high in country Y the total cost of the product when reach to country X market will be 20 + 20 = 40

whereas if u produce that same in country X cost will be 30

so u see Op E is not actually necessary.

However, i didn't get a proper reasoning to eliminate Op A...can u pls explain your views on Op A????

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sl750: Master | Next Rank: 500 Posts; Posts: 496; Joined: Tue Jun 07, 2011 5:34 amFollowed by: 1 member; Thanked: 38 times

by sl750 » Sat Jul 16, 2011 7:43 am

Choice A should be easier to eliminate IMO. Let's say, even if Country X received all permits, it doesn't go along with the determination that Country Y could increase its profits in the long term. It requires a market in order to be able to sell its products to become profitable.

For this example, I think it does not do any harm to consider a real world example. If you are going to
start a business in a new country, you would naturally want to know if your products have a market, without a market just knowing whether you can obtain the necessary permits and source cheap labor will not help with the goal of making profits

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jainnikhil02: Master | Next Rank: 500 Posts; Posts: 123; Joined: Tue May 31, 2011 12:26 amFollowed by: 1 member; Location: Hyderabad; Thanked: 5 times

by jainnikhil02 » Sat Jul 16, 2011 7:53 am

C is the answer.

The best way to solve the question is elimination and back track.

Labor cast is not the only criteria which can be choose to make a assumtion that it is profitable.

Nikhil K Jain
____________________

"Life is all about timing" Don't waste your and others time.

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Ozlemg: Master | Next Rank: 500 Posts; Posts: 407; Joined: Tue Jan 25, 2011 9:19 amFollowed by: 7 members; Thanked: 25 times

by Ozlemg » Sat Jul 16, 2011 11:08 am

HSPA wrote:Consider only 3 options A/C/E.. please explain what is wrong with E

Country X imposes heavy tariffs on imported manufactured goods. Company Y has determined that it couldincrease its profits in the long term by opening a factory in Country X to manufacture the goods that it currentlyproduces 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

It is classical but; if we negeate E, assumption does not fail
But when we negeate C ("¢A sustainable market for Company Y's goods does not currently exist in Country X) assumption become nonsense. That's why C is correct. My first answer was E. But lower labour cost may not be an important criteria to open a factory in one place!

The more you suffer before the test, the less you will do so in the test!

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HSPA: Legendary Member; Posts: 1101; Joined: Fri Jan 28, 2011 7:26 amFollowed by: 13 members; Thanked: 47 times; GMAT Score:640

by HSPA » Sat Jul 16, 2011 9:26 pm

OA is C

At present Labour cost is the driving force behind the 'abnormal' growth rates in India and china. It is THE first factor that judges present industry.

I was confused with the outsourcing aspect.

That is why I am not in sync with OA...

First take: 640 (50M, 27V) - RC needs 300% improvement
Second take: coming soon..
Regards,
HSPA.

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sandy217: Master | Next Rank: 500 Posts; Posts: 165; Joined: Wed Aug 04, 2010 9:44 pm; Thanked: 8 times

by sandy217 » Sun Jul 17, 2011 8:51 pm

HSPA wrote:OA is C

At present Labour cost is the driving force behind the 'abnormal' growth rates in India and china. It is THE first factor that judges present industry.

I was confused with the outsourcing aspect.

That is why I am not in sync with OA...

Quick suggestion: Do not use any outside world information.Just play with the premises and conclusion of the argument. For Assumption questions , We generally narrow down to 1-2 answer choices.Apply negation technique to figure out the answer,when negated, that can shatter the conclusion.

Thanks
~

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