reply2spg wrote:what is the source of this question?

kaulnikhil wrote:

reply2spg wrote:what is the source of this question?

GMAT SETS

fibbonnaci wrote:conclusion: to protect the steel industry in Turinan, the government of Turinan should levy heavy tariffs against foreign steel imports.

Premise: Many of these foreign imports are less expensive because the governments of the countries subsidize their steel industries.

Lets look at our options now :

A. Steel produced in Turinan is rarely competitive on the world market, partially as a result of the fact that the steel industry in Turinan is not subsidized by the government. [This strengthens the argument. It says that tariffs imposed will deliver the desired effect. Eliminated]

B. No clear penalties for violating the international ban on government subsidization of steel manufacture have been specified to date. [if the penalties exist so what? how is the conclusion affected? Eliminated!]

C. Many non-steel manufacturers in Turinan must contend with heavy competition, both at home and on the world market, and steel represents a large proportion of their materials costs. [This is a strengthner again!It tells that steel represents a large proportion of material costs so an increase in the tariffs will force them to look at local manufacturers. Eliminated!]

D. Government subsidies are not the only factor contributing to the availability of lower-cost foreign steel products that are currently threatening the steel industry of Turinan. [ My answer. It correctly points out that cost is not the only reason.say the quality is extremely good. therefore evn if Turania imposes tariffs on imports, it may not affect the consumption coz of some other attraction in the product!]

E. Steelworkers in Turinan, on average, earn higher wages than do steelworkers in many of the countries from which the referenced foreign steel imports originate.[ steel workers earning higher wages does not imply anything. Eliminated!]

Hope this helps!

fibbonnaci wrote:See higher costs means lower profits to the company and hence they turn to the local industries.
Now local industries jobs are safe. and hence the program is protecting the local guys.
There is no reason to assume that the companies are gonna stick with the import steel even though their prices are going to rise.
The program is initiated to protect the local industries, and i dont see a reason why this companies need to stick to higher import rates and pull themselves into loss?
Honestly, i would need one more statement to tell that companies will not shift their preferences no matter what coz of some other special feature of the imported steel.
If Chennai can produce the same steel as in Delhi, why would an industry in Chennai insist on getting the steel from Delhi inspite of the Delhi steel being greater in price???
I still dont buy C. There are so many inherent assumptions in it.

Therefore, to protect the steel industry in Turinan, as well as employment in other industrial sectors, the government of Turinan should levy heavy tariffs against foreign steel imports.