GMAT Verbal : Making Inferences in Business Passages

Study concepts, example questions & explanations for GMAT Verbal

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Example Questions

Example Question #2 : Business Passages

While hotels have traditionally held a firm grip on the market of vacation-goers, the emergence of companies fostering short-term rentals are dramatically changing the landscape of the travel industry. Before the advent of the modern online forum, short-term rentals were an arrangement limited by sheer logistics. Information about the availability of (and desire for) a short-term rental was difficult to transmit and share. However, with the current explosion of social media and cyber enterprise, the business model of short-term rentals has blossomed.

In 2011, 40% of travelers reported that they would be staying in a short-term rental during the year, as opposed to a traditional hotel. By 2013, this figure had jumped up to a staggering 49%. The short-term rental business is a $24 billion market, holding 8% of the total market of U.S. travel. Rapidly expanding and growing with the innovations of creative renters, the question that hangs in the air is what this means for communities. Short-term rentals have had a polarizing effect in many ways, becoming a source of joy for venturists and cause of dismay for many homeowners.

In recent news, there have been incredible scandals in which short-term renters have abused the property loaned to them, causing thousands of dollars' worth of property damage. Other accusations include disturbing the peace and the commission of criminal acts. Homeowners' Associations (HOAs) have been up in arms, and the legal backlash has been significant. New York enacted firm restrictions on short-term renters, and many HOAs now embed limits on the purposes that a space may be used for, barring short-term rentals.

However, this reaction is an over-reaction, and a detrimental one at that. Cities and towns that set hard limits against short-term rentals are halting the economic growth that would otherwise accompany them. Vacationers are likely to be deterred from venturing out to towns that have banned more affordable short-term rentals. While some vacationers might opt to stay at a hotel in desirable locations, as the short-term rental industry continues to grow, it will become more and more likely that vacation-goers will simply choose alternative destinations that actually allow for short-term rentals.

This is not to say, however, that short-term rentals should be completely unregulated. The key is imposing useful regulations that are mutually beneficial to both communities and to the proprietors of short-term rentals. One potential solution would be to impose reasonable taxes on visitors that use short-term rentals; having requirements for minimum stays could also ensure more consistency for the communities. This also has the added benefit of generating income for towns and cities. There is no reason why communities should see the short-term rental industry as an adversary, when it can just as easily be made into an ally.

Which of the following, if true, best supports the author's contention that bans against short-term rentals would inhibit economic development?

Possible Answers:

Many vacationers exclusively use short-term rentals and would be unlikely to visit a town or city without them.

All vacationers enjoy short-term rentals, but would substitute hotels if they were not available.

The average vacationer is very flexible with respect to the types of housing that they will use when travling, which includes the use of short-term rentals.

Vacationers who enjoy short-term rentals tend to spend more money in tourist destinations.

Many vacationers enjoy short-term rentals and could visit a town or city without them.

Correct answer:

Many vacationers exclusively use short-term rentals and would be unlikely to visit a town or city without them.

Explanation:

The author's conclusion that bans against short-term rentals would inhibit economic development hinges on the fact that short-term rentals are a non-substitutable commodity that consumers seek out. 

The only answer choice that describes short-term rentals as a non-substitutable commodity is "Many vacationers exclusively use short-term rentals and would be unlikely to visit a town or city without them."

If many vacationers exclusively use short-term rentals, then that means they will not use hotels as a replacement. As a result, towns and businesses would lose the business that these patrons would otherwise provide. 

A tempting wrong answer is "Vacationers who enjoy short-term rentals tend to spend more money in tourist destinations." This answer is not as strong as the correct answer because it does not make an argument that short-term rentals are non-substitutable. There is nothing to suggest that vacationers who enjoy short-term rentals would not settle for hotels if short-term rentals were not available.

Example Question #3 : Business Passages

The United Nations Convention on Contracts for the International Sale of Goods (CISG) can help countries throughout the world have a more uniform way of navigating the challenging waters of international law surrounding trade. It is not uncommon for two countries to have adopted different laws on international trade that conflict with each other. This becomes a serious problem when trade disputes arise. To help make this concept more tangible, consider the following hypothetical.

Suppose China ships three million dollars' worth of electronics to Uganda using standard bulk shipping transportation methods via a commonly traveled sea route. However, the packaging isn't secured in a manner sufficient to withstand unforeseen weather conditions. As a result, the goods become damaged in transit and are no longer fit for resale. Given that two countries are involved in this transaction–China and Uganda–the question arises as to which country’s trade laws will apply to resolve the matter at hand.

In this scenario, it is fortunate that both China and Uganda are parties to the CISG, which provide for a uniform set of laws governing trade. Such laws cover which party would be responsible for the damaged goods in this scenario. As a result, there will be no dispute as to whether China’s or Uganda's trade laws apply. Given that both countries are parties to the CISG, the laws set forth by the CISG would be applicable.

However, not all countries are parties to the CISG. One example is Rwanda. Even though Rwanda is not a party to the CISG, the fact of the matter is that CISG laws can still apply to it. The CISG applies to trade between countries so long as one of those countries is a party to the CISG (unless the parties expressly specify that the CISG will not apply to their specific trade arrangement). Several of Rwanda's main trade partners, such as the United States, China, Belgium, and Uganda, are parties to the CISG, so the laws of the treaty will apply in those trade agreements. Meanwhile, there is a different story when it comes to Rwanda's trade agreements with Kenya, Swaziland, Tanzania, and Thailand, which are not parties to the CISG. Due to these countries’ lack of membership in the CISG, if a problem ever arose in a trade agreement between Rwanda and one those countries, it would be unclear as to which country’s laws would apply.

There has been heated discussion as to whether Rwanda should sign the CISG. The United Nations Development Program takes the stance that it would behoove Rwanda to join. Whether or not Rwanda decides to become a member, the CISG will still apply to a large portion of its trade agreements, as about 100 countries are in fact CISG members, with a strong portion of those members also being trade partners with Rwanda. On the flip side, some Rwandan politicians believe that valuable autonomy would be lost if Rwanda assented to the CISG. However, given the potential benefits that Rwanda stands to gain from the CISG, these fears do not merit forgoing such a valuable opportunity.

Which of the following, if true, best supports the author’s contention that Rwanda should become a member of the CISG?

Possible Answers:

Becoming a CISG member can sometimes delay the processing of trade agreements because additional protocols are set in place for members to follow. 

Status as a CISG member can deter non-CISG countries from engaging in trade arrangements. 

Disputes over which country's laws to apply in commercial trade situations can chill future trade arrangements with other countries, even those which belong to the CISG. 

Participation fees for becoming a CISG member can hinder certain countries from joining. 

Even if a country is a CISG member, commercial trade disputes are just as likely to occur. 

Correct answer:

Disputes over which country's laws to apply in commercial trade situations can chill future trade arrangements with other countries, even those which belong to the CISG. 

Explanation:

Given that the purpose of CISG is to reduce disputes over trade between countries, the correct answer is, "Disputes over which country's laws to apply in commercial trade situations can chill future trade arrangements with other countries, even those which belong to the CISG." This is the correct answer because the inference can be made that if the CISG is reducing disputes between countries, and that there is a weaker chance of future trade arrangements being chilled. 

Example Question #2 : Inferences About Authorial Opinions And Beliefs In Law Passages

The United Nations Convention on Contracts for the International Sale of Goods (CISG) can help countries throughout the world have a more uniform way of navigating the challenging waters of international law surrounding trade. It is not uncommon for two countries to have adopted different laws on international trade that conflict with each other. This becomes a serious problem when trade disputes arise. To help make this concept more tangible, consider the following hypothetical.

Suppose China ships three million dollars' worth of electronics to Uganda using standard bulk shipping transportation methods via a commonly traveled sea route. However, the packaging isn't secured in a manner sufficient to withstand unforeseen weather conditions. As a result, the goods become damaged in transit and are no longer fit for resale. Given that two countries are involved in this transaction–China and Uganda–the question arises as to which country’s trade laws will apply to resolve the matter at hand.

In this scenario, it is fortunate that both China and Uganda are parties to the CISG, which provide for a uniform set of laws governing trade. Such laws cover which party would be responsible for the damaged goods in this scenario. As a result, there will be no dispute as to whether China’s or Uganda's trade laws apply. Given that both countries are parties to the CISG, the laws set forth by the CISG would be applicable.

However, not all countries are parties to the CISG. One example is Rwanda. Even though Rwanda is not a party to the CISG, the fact of the matter is that CISG laws can still apply to it. The CISG applies to trade between countries so long as one of those countries is a party to the CISG (unless the parties expressly specify that the CISG will not apply to their specific trade arrangement). Several of Rwanda's main trade partners, such as the United States, China, Belgium, and Uganda, are parties to the CISG, so the laws of the treaty will apply in those trade agreements. Meanwhile, there is a different story when it comes to Rwanda's trade agreements with Kenya, Swaziland, Tanzania, and Thailand, which are not parties to the CISG. Due to these countries’ lack of membership in the CISG, if a problem ever arose in a trade agreement between Rwanda and one those countries, it would be unclear as to which country’s laws would apply.

There has been heated discussion as to whether Rwanda should sign the CISG. The United Nations Development Program takes the stance that it would behoove Rwanda to join. Whether or not Rwanda decides to become a member, the CISG will still apply to a large portion of its trade agreements, as about 100 countries are in fact CISG members, with a strong portion of those members also being trade partners with Rwanda. On the flip side, some Rwandan politicians believe that valuable autonomy would be lost if Rwanda assented to the CISG. However, given the potential benefits that Rwanda stands to gain from the CISG, these fears do not merit forgoing such a valuable opportunity.

The author would most likely agree with which of these statements?

Possible Answers:

Although joining the CISG has benefits, Rwanda ultimately should not join the CISG. 

It would be to Rwanda's benefit to join the CISG. 

It is imperative that Rwanda join the CISG in order to avoid impending trade disputes that could prove to be disastrous. 

The CISG has a narrow window of applicability. 

There are positive and negative aspects that Rwanda should weigh and balance when deciding whether to join the CISG. 

Correct answer:

It would be to Rwanda's benefit to join the CISG. 

Explanation:

The correct answer is, "It would be to Rwanda's benefit to join the CISG."

A tempting wrong answer is "It is imperative that Rwanda join the CISG in order to avoid impending trade disputes that could prove to be disastrous." However, this is not correct because the author does not take such an extreme position. While the author believes it would be in Rwanda's favor to join the CISG, there is no indication that the author foresees disastrous results if Rwanda foregoes joining. 

The other answer choices state positions that are directly contrary to the author's arguments: 

"The CISG has a narrow window of applicability," is wrong because the author argues that the CISG is broadly applicable. 

"Although joining the CISG has benefits, Rwanda ultimately should not join the CISG," is wrong because the author states that Rwanda should join the CISG. 

"There are positive and negative aspects that Rwanda should weigh and balance when deciding whether to join the CISG," is wrong because the author does not argue that Rwanda should weigh and balance positives and negatives, but rather states that Rwanda should simply join.

Example Question #1 : Extrapolating From The Text In Business Passages

The United Nations Convention on Contracts for the International Sale of Goods (CISG) can help countries throughout the world have a more uniform way of navigating the challenging waters of international law surrounding trade. It is not uncommon for two countries to have adopted different laws on international trade that conflict with each other. This becomes a serious problem when trade disputes arise. To help make this concept more tangible, consider the following hypothetical.

Suppose China ships three million dollars' worth of electronics to Uganda using standard bulk shipping transportation methods via a commonly traveled sea route. However, the packaging isn't secured in a manner sufficient to withstand unforeseen weather conditions. As a result, the goods become damaged in transit and are no longer fit for resale. Given that two countries are involved in this transaction–China and Uganda–the question arises as to which country’s trade laws will apply to resolve the matter at hand.

In this scenario, it is fortunate that both China and Uganda are parties to the CISG, which provide for a uniform set of laws governing trade. Such laws cover which party would be responsible for the damaged goods in this scenario. As a result, there will be no dispute as to whether China’s or Uganda's trade laws apply. Given that both countries are parties to the CISG, the laws set forth by the CISG would be applicable.

However, not all countries are parties to the CISG. One example is Rwanda. Even though Rwanda is not a party to the CISG, the fact of the matter is that CISG laws can still apply to it. The CISG applies to trade between countries so long as one of those countries is a party to the CISG (unless the parties expressly specify that the CISG will not apply to their specific trade arrangement). Several of Rwanda's main trade partners, such as the United States, China, Belgium, and Uganda, are parties to the CISG, so the laws of the treaty will apply in those trade agreements. Meanwhile, there is a different story when it comes to Rwanda's trade agreements with Kenya, Swaziland, Tanzania, and Thailand, which are not parties to the CISG. Due to these countries’ lack of membership in the CISG, if a problem ever arose in a trade agreement between Rwanda and one those countries, it would be unclear as to which country’s laws would apply.

There has been heated discussion as to whether Rwanda should sign the CISG. The United Nations Development Program takes the stance that it would behoove Rwanda to join. Whether or not Rwanda decides to become a member, the CISG will still apply to a large portion of its trade agreements, as about 100 countries are in fact CISG members, with a strong portion of those members also being trade partners with Rwanda. On the flip side, some Rwandan politicians believe that valuable autonomy would be lost if Rwanda assented to the CISG. However, given the potential benefits that Rwanda stands to gain from the CISG, these fears do not merit forgoing such a valuable opportunity.

Which of the following, if true, would be most likely to weaken the author’s argument that Rwanda should join the CISG?

Possible Answers:

The majority of Rwanda’s trade is conducted with Kenya, Swaziland, Tanzania and Thailand.

Kenya, Swaziland, Tanzania and Thailand have since become CISG members.

The United States has a neutral stance as to whether Rwanda should join the CISG. 

Most Rwanda politicians encourage Rwanda to join the CISG. 

The article was written several years ago, and in the elapsed time, many member countries to the CISG have withdrawn their membership.

Correct answer:

The article was written several years ago, and in the elapsed time, many member countries to the CISG have withdrawn their membership.

Explanation:

The option that would be most likely to weaken the author's argument is, "The article was written several years ago, and in the elapsed time, many member countries to the CISG have withdrawn their membership." Given that the CISG draws its power from the fact that many countries are a member, if countries began withdrawing their membership, the CISG would lose power. This would make it less enticing for Rwanda to join. 

A tempting wrong answer choice is "The United States has a neutral stance as to whether Rwanda should join the CISG." While this would not necessarily help the author's argument, it would not weaken it as much as the correct answer choice.

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