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MGMAT Exam Question

Critical Reasoning, Reading Comprehension
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MGMAT Exam Question

by Spring599 » Wed Sep 30, 2009 12:32 pm
Can someone please explain how this answer makes sense. Just one of the reasons why I dislike GMAT's verbal section (I think MGMAT offers exceptional guides, so I I am not biased)

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.

Correct answer is C.

The question states that the company already manufactures this product in its home country for sale in Country X. The sale of a product would indicate that a market already exists. In my opinion, this answer lacks any logic.
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Source: — Verbal Reasoning |
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by akhilkathuria » Thu Oct 01, 2009 12:57 pm
Answer C is correct,
It doesnt say that company Y exports stuff to country X.
i means question doesnt state that
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by Spring599 » Thu Oct 01, 2009 6:36 pm
I'm pretty sure it does say that.

opening a factory in Country X to manufacture the goods that it currently produces in its home country for sale in Country X

So, we are supposed to assume that the company produces a product for sale in country X, but doesn't actually sell this product to country X? I do not see the logic in this.
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by mr big » Fri Oct 16, 2009 5:14 am
what level question is this from MGMAT?
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a good confusing question!

by kiennguyen » Thu Oct 22, 2009 12:25 am
opening an operation in another country is one of strategies which reduce cost of production. however, it should be known whether this strategy will generate benefits in the long term. in this situation, C & E together should be a good answer.
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IMO

by enniguy » Mon Oct 26, 2009 8:54 pm
Spring599 wrote:I'm pretty sure it does say that.

opening a factory in Country X to manufacture the goods that it currently produces in its home country for sale in Country X

So, we are supposed to assume that the company produces a product for sale in country X, but doesn't actually sell this product to country X? I do not see the logic in this.
Focus on the term "long Term" in the question. The corresponding requirement in the assumption should be "sustainable".
E.g:- Selling shoes in a village of 10 families might be profitable but is it worth investing a manufacturing plant for those 10 families?
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by ajayiitr » Wed Dec 16, 2009 3:02 pm
Correct answer is C, though, when I was doing this problem, I picked best answer as A.
My breakdown of problem is that there can be three thoughts for assumption -

1. Increase its profits
2. In the long-term
3. by opening a factory in Country X.

1. Increase its profits is for granted since, company doesn't have to pay tariffs now. So, that rejects answer E.

3. by opening a factory in Country X. I understood when MGMAT explains it that its a contingent plan which is based on opening a factory in Country X. Its also a stated premise. Its unlikely that it can be assumption (unstated premise) when its a premise in argument. That rejects answer A the one that I picked before.

2. In the long-term is the key, because company X is selling its goods in country Y right now, and it wants to maximize its long-term profits by opening a factory in country Y itself and thus, avoiding tariffs. However, argument doesn't state explicitly "long'term profits or sale or market". So, thats the unstated premise out of three. So, correct answer is C.
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