Question: The cost of producing radios in country Q is 10 percent less than the cost of producing radios in country Y. Even after transportation fees and tariff charges are added, it is still cheaper for a company to import radios from country Q to Country Y than to produce radios in Country Y.
The statements above, if true, best support which of the following assertions?
(A) Labor costs in country Q are 10 percent below those in Country Y.
(B) Importing radios from country Q to country Y will eliminate 10 percent of the manufacturing jobs in Country Y.
(C) The tariff on a radio imported from country Q to country Y is less than 10 percent of the cost of manufacturing the radio in country Y
(D) The fee for transporting a radio from country Q to Country Y is more than 10 percent of the cost of manufacturing the radio in country Q
(E) It takes 10 percent less time to manufacture a radio in country Q than it does in Country Y.
“The cost of producing radios in country Q is 10 percent less”- is a GMAT critical reasoning topic. This GMAT Critical Reasoning topic has been taken from the book ‘The Official Guide for GMAT Reviews.’
This GMAT critical comes with five options and candidates need to choose the one which is correct. GMAT critical reasoning tests the logical and analytical skills of the candidates. To answer the question, a candidate can either find a piece of evidence that would weaken the argument or have logical flaws in the argument. Candidates get 65 minutes to answer 36 MCQ questions in the critical reasoning section of the GMAT.
Answer: C
Explanation: The statement states: "the statement above, if true" is key. We have to assume everything it says is true, meaning that it most definitely IS cheaper to import from Q than to produce in Y. Even with tariff + transport. Essentially, we DO have information about the transport fees; we know that no matter what the tariff fee is, they're never going to make it more expensive than Y.
So let's say cost of Y = 100%
We know that Q = 90% (of Y)
We know that Q + tariff + transportation < 100%
Therefore 0% <= tariff < 10% AND 0% <= transportation < 10% ... we just don't know specifically. Answer C basically says Tariff is less than 10% of Y. True!
A) 'Labour' is a bit out of scope. What if the radios are made entirely by machines?
B) Option B wildly assumes a direct relationship between the external markets and Country Y's manufacturing industry. It also implies that all manufacturing jobs in Country Y are related to radio.
C) This is the right option. As it says: "Even after transportation fees and tariff charges are added,it is still cheaper for a company to import radios from country Q to Country Y than to produce radios in Country Y." If the tariff was 10 percent or more, then it would NOT be cheaper. But it is cheaper, so it must be less.
D) This option follows similar logic as above, except the 10% here is less meaningful as a benchmark because Q+10% of Q is not the same as Y -10% of Y. Either way it falls through.
E) Time = money, but there is nothing here to suggest the tradeoff is a perfect 1:1 ratio.
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