The cost of producing a widget in Country A is 15 percent less than the cost of producing the widget in Country B. Even after factoring in transport costs and import taxes, it is still cheaper for a business in Country B to import widgets from Country A than to produce the widget in Country B.
The statements above, if true, best support which of the following assertions?
A – Importing widgets from Country A to Country B will eliminate 15 percent of the manufacturing jobs in Country B.
B – Labor costs in Country A are 15 percent below those in Country B.
C – The fee for transporting a widget from Country A to Country B is more than 15 percent of the cost of manufacturing the widget in Country A.
D – The import tax for a widget imported from Country A to Country B is less than 15 percent of the cost of manufacturing the widget in Country B.
E – It takes 15 percent less time to manufacture a widget in Country A than it does in Country B.
OA : D
Explanation : From the information above we know that: Cost of production of widget from Country A is 15 % less than that of Country B. We also know that Cost of production of Widget in Country A + import tax + transport cost < cost of producing the widget in Country B. Solving this as an equation, we see that
W(Y) = W(K)+W(Y)*1.15 ; W(Y) > W(K)+Tax+Shipping
Therefore it follows that Tax+Shipping < 1.15W(Y); or in English -> The cost of transport and tax for a widget made in Country A is less than 15% cost of manufacturing a widget in Country B.
A – “Jobs” is without data and must be eliminated.
B – We have no data about labor costs.
C – This is opposite of the inference drawn, the fee must be lower than 15% of Cost of making the widget in Country B.
D – This is absolutely true since if Tax + transport < 15% cost of production in Country B then it must be true that tax is definitely less than 15% of cost of manufacture of a widget in Country B.
E – The amount of time taken is without data and must be eliminated.