Kollontay problem

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gmatrant: Master | Next Rank: 500 Posts; Posts: 416; Joined: Wed Oct 03, 2007 9:08 amFollowed by: 1 member; Thanked: 10 times

by gmatrant » Wed Sep 08, 2010 9:06 am

Companies in the country of Kollontay can sell semiconductors in the country of Valdivia at a price that is below the cost to Valdivian companies of producing them. To help those Valdivian companies, the Valdivian legislature plans to set a minimum selling price in Valdivia for semiconductors manufactured in Kollontay that is ten percent greater than the average production costs for companies in Valdivia.

Which of the following, if true, most seriously threatens the success of the plan?

(A) The annual rate of inflation in Kollontay is expected to exceed ten percent within the next year.
(B) Valdivia is not the only country where companies in Kollontay currently sell semiconductors.
(C) Some Valdivian companies that sell semiconductors have announced that they plan to decrease their price for semiconductors.
(D) The government of Kollontoy will also set a minimum price for selling semiconductors in that country.
(E) Emerging companies in countries other than Kollontay will still be able to sell semiconductors in Valdivia at a price below the cost to Valdivian companies to manufacture them.

Can choice A be the answer to this question.

Source: Beat The GMAT — Critical Reasoning | Wed Sep 08, 2010 9:06 am

debmalya_dutta: Master | Next Rank: 500 Posts; Posts: 385; Joined: Sun Jul 12, 2009 10:16 pmFollowed by: 2 members; Thanked: 29 times; GMAT Score:710

by debmalya_dutta » Wed Sep 08, 2010 9:50 am

And I thought the answer was E ?

A) The annual rate of inflation in Kollontay is expected to exceed ten percent within the next year.- the rate of inflation increase would imply that the prices of the Kollontay goods would increase .. Fine , but after that increase , the price of the simiconductors produced in Kollontay could still be far cheaper than those produced in Valdivian.. So, I dont think this necessarily weakens
(B) Valdivia is not the only country where companies in Kollontay currently sell semiconductors. This has nothing to do with the success of the plan which is to ensure that Valdivian industries get a price protection
(C) Some Valdivian companies that sell semiconductors have announced that they plan to decrease their price for semiconductors. This has nothing to do with the success of the plan . This would mean that now the compnies will have a better profit margin
(D) The government of Kollontoy will also set a minimum price for selling semiconductors in that country. again , nothing to do with the valdivian legislature's plan
(E) Emerging companies in countries other than Kollontay will still be able to sell semiconductors in Valdivia at a price below the cost to Valdivian companies to manufacture them. This would mean that the validivian companies might still not be covered by the protection offered by the plan

@Deb

vishalj: Master | Next Rank: 500 Posts; Posts: 104; Joined: Sun Mar 18, 2007 9:03 pm; Thanked: 4 times

by vishalj » Wed Sep 08, 2010 10:23 am

IMO E

(A) The annual rate of inflation in Kollontay is expected to exceed ten percent within the next year. No effect on the conclusion. let's take this. If the annual rate of inflation exceed 10%, two things could happen - either Kollontay adjusts its price and add another 10% to its price or doesn't change its price. In both case, it will not weaken the conclusion. Kollontay will still be selling for 10 % more than the production costs.
(B) Valdivia is not the only country where companies in Kollontay currently sell semiconductors. out of score. Since we are talking about Kollontay selling to Valdivia only, this will not have any impact on the conclusion.
(C) Some Valdivian companies that sell semiconductors have announced that they plan to decrease their price for semiconductors. No impact on the conclusion.
(D) The government of Kollontoy will also set a minimum price for selling semiconductors in that country. No impact
(E) Emerging companies in countries other than Kollontay will still be able to sell semiconductors in Valdivia at a price below the cost to Valdivian companies to manufacture them. It means that other companies will able to sell at the price below the cost and Valdivian companies will have the same problem that they had with Kollontay for which the legistation was constituted.

diebeatsthegmat: Legendary Member; Posts: 1119; Joined: Fri May 07, 2010 8:50 amFollowed by: 3 members; Thanked: 29 times

by diebeatsthegmat » Thu Sep 09, 2010 1:48 am

gmatrant wrote:Companies in the country of Kollontay can sell semiconductors in the country of Valdivia at a price that is below the cost to Valdivian companies of producing them. To help those Valdivian companies, the Valdivian legislature plans to set a minimum selling price in Valdivia for semiconductors manufactured in Kollontay that is ten percent greater than the average production costs for companies in Valdivia.

Which of the following, if true, most seriously threatens the success of the plan?

(A) The annual rate of inflation in Kollontay is expected to exceed ten percent within the next year.
(B) Valdivia is not the only country where companies in Kollontay currently sell semiconductors.
(C) Some Valdivian companies that sell semiconductors have announced that they plan to decrease their price for semiconductors.
(D) The government of Kollontoy will also set a minimum price for selling semiconductors in that country.
(E) Emerging companies in countries other than Kollontay will still be able to sell semiconductors in Valdivia at a price below the cost to Valdivian companies to manufacture them.

Can choice A be the answer to this question.

the answer must be E. althought the gover of valdivian settled a price for products of kollontay selling in it countries it couldnt help the valdivian product since apart from kollotay, other companies also sell the products with lower price.
A cant be the answer because inflation is out of scope

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