Question

The company 'Dreams' has been producing most of its products in Costa. The government of Costa has passed a new ruling that states that all workers including that of 'Dreams' will have to be provided with double the wages. Hence the cost of products of company 'Dreams' will increase. The conclusion above assumes that...

• A. The company has never been forced to raise its wages due to government policies
• B. The company will still be able to cut costs elsewhere
• C. The company will continue to produce its products in Costa
• D. The company will increase the wages, as its helps in branding
• E. The products in Costa command a premium

Hint:

Use the "Negation Test" for assumption questions. Negate the answer choice and see if the argument falls apart. If we negate option (C), it becomes: "The company will not continue to produce its products in Costa." If this is true, the conclusion that its costs will increase (due to Costa's law) is no longer valid. Since negating the option destroys the argument, it is a necessary assumption.

Answer 1

The Correct Option is C

Step 1: Understanding the Concept:
This is a critical reasoning question that asks you to identify the unstated assumption in an argument. An assumption is a necessary piece of information that bridges the gap between the premises (evidence) and the conclusion.

Step 3: Detailed Explanation:
Let's break down the argument:
Premise 1: Dreams produces most of its products in Costa.
Premise 2: The government of Costa will force Dreams to double the wages of its workers in Costa.
Conclusion: Therefore, the cost of Dreams' products will increase.
The Logical Gap: The argument jumps from "wages will increase in Costa" to "the company's product costs will increase." This jump is only valid if the company is actually affected by the wage increase in Costa. What if the company avoids this new rule? The conclusion would no longer be certain. The necessary assumption must be something that ensures the company cannot or will not avoid the impact of the new wage rule.
Let's analyze the options:
(A) The company has never been forced to raise its wages due to government policies
The company's past experience is irrelevant to the future impact of this new, specific law.
(B) The company will still be able to cut costs elsewhere
This is a weakener, not an assumption. If the company can cut other costs, it might offset the wage increase, and the final product cost might not rise. An assumption must support the conclusion.
(C) The company will continue to produce its products in Costa
This is a crucial assumption. If the company decides to move its production out of Costa to another country to avoid the wage hike, then the new Costa law would not affect its labor costs. In that scenario, the conclusion that its product costs will increase would not follow from the premises. Therefore, for the conclusion to be true, we must assume that production remains in Costa.
(D) The company will increase the wages, as its helps in branding
The company's motive is irrelevant. The premise states that the government is forcing them to increase wages, so their willingness or branding strategy doesn't matter.
(E) The products in Costa command a premium
This relates to the selling price or profit margin, not the cost of production. While a high price might make it easier to absorb higher costs, it's not a necessary assumption for the production cost itself to increase.

Step 4: Final Answer:
The argument is entirely dependent on the assumption that 'Dreams' will remain in Costa and be subject to the new wage law. Therefore, option (C) is the correct answer.