Critical Reasoning

The Japanese economic model created strong domestic industries through subsidies from its Ministry of Trade and by closing off competitive foreign firms to its domestic market. This strategy promised to help economic growth by incubating domestic industries. New Japanese industries could count on a known local demand and would be protected from competition by tariffs and other barriers. The program could reduce the amount of imports and therefore improve the nation's balance of trade. Which of the following, based on the passage above, is a weakness in this economic strategy?

A) A protectionist policy will create animosity among other nations.

B) Fast growth of small industries will create a class of millionaires and increase the inequality of income.

C) Subsidies and import constraints keep domestic prices high and impose a burden on consumers.

D) Quotas are more regressive than tariffs.

E) The demand for the products made by the incubated industries would not be known.


OA is C.

why the OA is C, doesn't it goes far beyond the scope of the statement given,
obviously this can be deduced by the general business knowledge,but here i think we need to decide from the info given in the statement only.

In my opinion Ans should be E since the statement says known demand, it does not give the measure whether it will be increasing or a decreasing demand.

Suggestions any?

Wow this is a hard one. I would say 'C', what's the OA?

IMO C Took almost 2:07 min

Conclusion: The Prog will some how improve the nation's balance of trade.

A) A protectionist policy will create animosity among other nations. (Out of scope)

B) Fast growth of small industries will create a class of millionaires and increase the inequality of income. (Contender Answer choice )

C) Subsidies and import constraints keep domestic prices high and impose a burden on consumers. (This option is within the scope because author discusses about the domestic market(We can reject option B as it's farther in scope compared to this option). If the consumers are burden with extra cost , it hurts the conclusion that the nation's balance of trade will improve. Correct)

D) Quotas are more regressive than tariffs. (We do not know whether tariffs are regressive too. Even if we know , it does not have any affect on conclusion)

E) The demand for the products made by the incubated industries would not be known. (we are concerned about the overall trade balance. Moreover, unknown doesn't mean it's harming the trade balance. It may be possible that demands are surplus, making the argument strong)

where is this :

Subsidies and import constraints keep domestic prices high and impose a burden on consumers

stated in the premise direcly or indirectly??Please clarify??

abhishekswamy wrote:where is this :

Subsidies and import constraints keep domestic prices high and impose a burden on consumers

stated in the premise direcly or indirectly??Please clarify??

This is a "flawed reasoning type question" . However you have to keep in mind that the correct answer option should be within the scope. Lets see what "words" in option C shows that C is within the scope.
The Japanese economic model created strong domestic industries through subsidies from its Ministry of Trade and by closing off competitive foreign firms to its domestic market.
Also stated in conclusion part : "The program could reduce the amount of imports and therefore improve the nation's balance of trade."
Option C says:
"import constraints keep domestic prices high and impose a burden on consumers" --> This says that even though Program is closing off competitive foreign firms,a kind of import constraints, domestic prices are high,which impose a burden on consumers.This hurts the conclusion about nation's trade BALANCE.

I hope its clear now.

smackmartine wrote:

abhishekswamy wrote:where is this :

Subsidies and import constraints keep domestic prices high and impose a burden on consumers

stated in the premise direcly or indirectly??Please clarify??

Because this is a "weakening-type-question" outside knowledge is allowed. However you have to keep in mind that the correct answer option should be within the scope. Lets see what "words" in option C shows that C is within the scope.
The Japanese economic model created strong domestic industries through subsidies from its Ministry of Trade and by closing off competitive foreign firms to its domestic market.
Also stated in conclusion part : "The program could reduce the amount of imports and therefore improve the nation's balance of trade."
Option C says:
"import constraints keep domestic prices high and impose a burden on consumers" --> This says that even though Program is closing off competitive foreign firms,a kind of import constraints, domestic prices are high,which impose a burden on consumers.This hurts the conclusion about nation's trade BALANCE.

I hope its clear now.

what does the consumers are burden with extra cost , have to do with the nation's balance of trade .
If consumers are burdened with extra cost , either
1)they will not buy the goods domestically produced
This doesn't hurt the balance of trade since this will not increase imports
or
2)they will revert to imported goods
This will require the domestic prices to be higher than the tariffed imported goods if the imports are to be increased
But this requires an assumption that domestic prices will be higher than the price of imported goods after tariffs are imposed

smackmartine wrote:

abhishekswamy wrote:where is this :

Subsidies and import constraints keep domestic prices high and impose a burden on consumers

stated in the premise direcly or indirectly??Please clarify??

Because this is a "weakening-type-question" outside knowledge is allowed.

This is a flaw in the arg. question .Note the the question stem does nt say "which of the following if true "
Moreover this question has been procured from lsatcenter.com something .
The explanations say that this is a must be true question type . )
Below is the original question in its entirety
The Japanese economic model created strong domestic industries through subsidies from its Ministry of Trade and by closing off competitive foreign firms to its domestic market. This strategy promised to help economic growth by incubating domestic industries. New Japanese industries could count on a known local demand and would be protected from competition by tariffs and other barriers. The program could reduce the amount of imports and therefore improve the nation's balance of trade. Which of the following, based on the passage above, is a weakness in this economic strategy?
A) A protectionist policy will create animosity among other nations.
B) Fast growth of small industries will create a class of millionaires and increase the inequality of income.
C) Subsidies and import constraints keep domestic prices high and impose a burden on consumers.
D) Quotas are more regressive than tariffs.
E) The demand for the products made by the incubated industries would not be known.

mundasingh123 wrote:

smackmartine wrote:

abhishekswamy wrote:where is this :

Subsidies and import constraints keep domestic prices high and impose a burden on consumers

stated in the premise direcly or indirectly??Please clarify??

Because this is a "weakening-type-question" outside knowledge is allowed. However you have to keep in mind that the correct answer option should be within the scope. Lets see what "words" in option C shows that C is within the scope.
The Japanese economic model created strong domestic industries through subsidies from its Ministry of Trade and by closing off competitive foreign firms to its domestic market.
Also stated in conclusion part : "The program could reduce the amount of imports and therefore improve the nation's balance of trade."
Option C says:
"import constraints keep domestic prices high and impose a burden on consumers" --> This says that even though Program is closing off competitive foreign firms,a kind of import constraints, domestic prices are high,which impose a burden on consumers.This hurts the conclusion about nation's trade BALANCE.

I hope its clear now.

what does the consumers are burden with extra cost , have to do with the nation's balance of trade .

Domestic trade directly implies interaction/transaction between native consumers and domestic industries,those are intrinsic part of nation's trade(After all we are talking about a nation's trade and not international trade. Nation's trade doesn't mean anything on its own, but its a combined form of domestic trades.). Any discrepancies with respect to money transaction(trade balance) between the consumers and domestic industries would mean unbalanced nation's trade.

smackmartine wrote:

mundasingh123 wrote:

smackmartine wrote:

abhishekswamy wrote:where is this :

Subsidies and import constraints keep domestic prices high and impose a burden on consumers

stated in the premise direcly or indirectly??Please clarify??

Because this is a "weakening-type-question" outside knowledge is allowed. However you have to keep in mind that the correct answer option should be within the scope. Lets see what "words" in option C shows that C is within the scope.
The Japanese economic model created strong domestic industries through subsidies from its Ministry of Trade and by closing off competitive foreign firms to its domestic market.
Also stated in conclusion part : "The program could reduce the amount of imports and therefore improve the nation's balance of trade."
Option C says:
"import constraints keep domestic prices high and impose a burden on consumers" --> This says that even though Program is closing off competitive foreign firms,a kind of import constraints, domestic prices are high,which impose a burden on consumers.This hurts the conclusion about nation's trade BALANCE.

I hope its clear now.

what does the consumers are burden with extra cost , have to do with the nation's balance of trade .

Domestic trade directly implies interaction/transaction between native consumers and domestic industries,those are intrinsic part of nation's trade(After all we are talking about a nation's trade and not international trade. Nation's trade doesn't mean anything on its own, but its a combined form of domestic trades.). Any discrepancies with respect to money transaction(trade balance) between the consumers and domestic industries would mean unbalanced nation's trade

I hope You read the posts that i created while you were posting this

@ mundasingh123,
I think while answering (in 2nd post) abhishekswamy's question I messed up with the word "weakening economic.." and actually lost track of what the question about. Definitely a flawed reasoning question.(I am going to edit the original post) However the line of reasoning I gave sounds Ok to me.
I don't think it's "must be true" type as some other sources have explained.

did you read my post which talks about assumptions ?

mundasingh123 wrote:did you read my post which talks about assumptions ?

Yes I did. I think we cannot assume both of these because argument clearly states that:

The Japanese economic model created strong domestic industries through subsidies from its Ministry of Trade and by closing off competitive foreign firms.

Consumers cannot carry out trade on their own with foreign firms,going against country's economic model.(so your second assumption falls apart.)

If consumers cannot carry out trade on their own with foreign firms, they have to depend on someone for their needs.Domestically produced products in this case- irrespective of how expensive products are.(so your 1st assumption falls apart too).

Let me know your thoughts.

smackmartine wrote:

mundasingh123 wrote:did you read my post which talks about assumptions ?

Yes I did. I think we cannot assume both of these because argument clearly states that:

The Japanese economic model created strong domestic industries through subsidies from its Ministry of Trade and by closing off competitive foreign firms.

Consumers cannot carry out trade on their own with foreign firms,going against country's economic model.(so your second assumption falls apart.)

If consumers cannot carry out trade on their own with foreign firms, they have to depend on someone for their needs.Domestically produced products in this case- irrespective of how expensive products are.(so your 1st assumption falls apart too).

Let me know your thoughts.

The stimlus talks about imposing trade barriers such as tariffs , duties etc but doesnt talk about stopping trade altogether

Who said consumers have to trade with the foreign manufacturers . Imported goods would still be available in the market ,only their prices will be high and the firms will be no longer competitive . This is based on the line which says "closing off competitive foreign firms "