An assumption is an unstated proposition that must be true for the argument to be valid. In this case, the author claims that since the small companies would be unable to afford the conversion, new manufacturing specs would put them all out of business. Ask yourself "does this have to be true? why not?" Some possible ways to poke at the argument (to challenge its assumptions):

1) would all 7 small companies have to convert? what if one or more is already matching the new specs?
2) would all 7 companies have to close shop? maybe they can manufacture something else instead and stay in business.
3) could the govt (or some other actor) provide financial assistance? if so the companies may not have to close shop.
4) could small companies pool their resources (eg: a merger) and stay in business?

The argument makes assumptions about each of these possibilities. The full solution below is taken from the GMATFix App.



-Patrick

EricKryk wrote:Three large companies and seven small companies currently manufacture a product with potential military applications. If the government regulates the industry, it will institute a single set of manufacturing specifications to which all ten companies will have to adhere. In this case, therefore, since none of the seven small companies can afford to convert their production lines to a new set of manufacturing specifications, only the three large companies will be able to remain in business.

10 companies ( 7 small companies and 3 large companies) involved in manufacture of Military products.

Govt Introduces regulatory measures for all the companies - Small companies cant afford it and only the large companies will remain in Business.

Which of the following is an assumption on which the author's argument relies?

(A) None of the three large companies will go out of business if the government does not regulate the manufacture of the product.

Might be true .

(B) It would cost more to convert the production lines of the small companies to a new set of manufacturing specifications than it would to convert the production lines of the large companies.

Might be true , apart from cost there might be other problems as well like technological knowhow , Labor issues etc...- Still we can Hold it for further evaluation.

(C) Industry lobbyists will be unable to dissuade the government from regulating the industry.

Irrelevant and out of scope.

(D) Assembly of the product produced according to government manufacturing specifications would be more complex than current assembly procedures.

Irrelevant and out of scope.

(E) None of the seven small companies currently manufactures the product to a set of specifications that would match those the government would institute if the industry were to be regulated.

Definitely true.

If the smaller companies are involved in production fo goods according to Government regulations it will not be a problem for them in near future coz they are already producing the goods as per requirements...


Hence Between (B) and (E) I choose E...

I also agree with what Abhishek explained. I would also like to go with option E.