Q23 - the constitution of

[ohthatpatrick]

What does the Question Stem tell us?
Similar to Principle-Example mixed with Must Be False. We'll be given rules and we need to assess whether at least one rule is being broken.

Break down the Stimulus:
Govt. sells state-owned entity --> sell for highest possible price on open market and ensure that citizens will have majority ownership for at least one year, post-sale.

Any prephrase?
Contrapositive …
can't have majority ownership for at least a year after sale --> can't sell state-owned entity.
Wouldn't be getting highest price in open market --> can't sell state owned entity.

Answer choice analysis:
A) Seems fine. Sold for highest bid (seems to be open market) and nothing threatens majority ownership.

B) Nothing here looks like "NOT highest price" or "DON'T retain majority ownership".

C) This looks like "cannot ensure citizens will retain majority ownership". Seems to break rule.

D) Looks fine.

E) This seems to definitely break the rule. It essentially pits the two requirements against each other. In order to achieve requirement 1 (majority ownership), you will lose requirement 2 (highest price). This is more concretely breaking the rule than C, which just says that it's difficult to tell whether there's majority ownership.

The correct answer is E.

Takeaway/Pattern: Tough choice with C vs. E. Just like with Must Be False inference questions, there's a difference between "not being sure of something" and "actively contradicting it". With C, we can't be sure the rules are being followed. With E, we can be sure the rules are NOT being followed. When you have two requirements, and meeting one means that you'll fail to meet the other, then you know you're screwed.

#officialexplanation

[ganbayou]

I dont understand the argument here...how can the principles be conflicted? I chose c and not sure why e is correct...

[kkate]

I chose C over E because I considered these as condition 1 and 2 that together make a comprehensive requirement. Not sure if I'm making sense but this was my thought process:

C - World Oil Company has made one of the highest offers for PetroNat, but World Oil's ownership structure is so complex that the government cannot determine whether citizens have majority ownership.

condition 1 (highest bid) is met but there is uncertainty regarding condition 2. Citizens may or may not have the majority ownership. The argument states that whenever the government sells a state-owed entity, it must ensure that citizens WILL have majority ownership. Since condition #2 is a could be true as opposed to a must be true at the time of sale, this violates condition 2. The government did not ENSURE that the citizens will hold the majority ownership.

E - The government place restrictions on who can purchase in order to ensure that citizens hold the majority ownership. However, these restrictions will reduce the price the government receives.

This doesn't seem to violate as condition 1 still holds valid. It's the highest price the government can command on the open market given that all conditions are in place. Therefore, although these restrictions reduce the price the government can receive without such in place, it is still considered the highest bid it can ask for/receive GIVEN the satisfaction of the requirement. It's like... equity in a sense of the accounting equation. Equity = Assets - Liability. Highest price IT CAN COMMAND = highest price including goodwill and all that jazz - value of restrictions that "devalues" and makes the deal less attractive.

I guess my question is... am I wrong to think that these conditions/requirements work in combination?

And pardon my crappy explanation....

[otooledp]

I too chose (C) over (E) initially. My thinking was that in (C), the government cannot meet the second condition--the structure is too complex for the government to "ensure" the required majority ownership.

Upon reading Patrick's explanation, though, I think (E) presents a better dilemma that shows that one of the conditions must be violated.

If the government does not place restrictions on who can purchase StateRail, a Country F-majority-owned entity cannot purchase it. Condition two violated. If the government does implement these restrictions, a Country F-majority-owned entity can purchase StateRail, but the price will necessarily be reduced--presumably, reduced relative to what that price would have been in the "open market," or the market absent any restrictions on sellers. Condition one violated.

So, either way, one of the constitutional requirements must be violated. The additional assumption that I think needs to be made, though, is that the reduction of price that occurs after the government places restrictions on who can purchase StateRail is a reduction below the highest price the government would receive in an "open market." I think this is entirely logical--if the restrictions "reduce the price," there must be some benchmark higher than that reduced price.

[brettboresow]

I chose C over E because I considered these as condition 1 and 2 that together make a comprehensive requirement. Not sure if I'm making sense but this was my thought process:

C - World Oil Company has made one of the highest offers for PetroNat, but World Oil's ownership structure is so complex that the government cannot determine whether citizens have majority ownership.

condition 1 (highest bid) is met but there is uncertainty regarding condition 2. Citizens may or may not have the majority ownership. The argument states that whenever the government sells a state-owed entity, it must ensure that citizens WILL have majority ownership. Since condition #2 is a could be true as opposed to a must be true at the time of sale, this violates condition 2. The government did not ENSURE that the citizens will hold the majority ownership.

E - The government place restrictions on who can purchase in order to ensure that citizens hold the majority ownership. However, these restrictions will reduce the price the government receives.

This doesn't seem to violate as condition 1 still holds valid. It's the highest price the government can command on the open market given that all conditions are in place. Therefore, although these restrictions reduce the price the government can receive without such in place, it is still considered the highest bid it can ask for/receive GIVEN the satisfaction of the requirement. It's like... equity in a sense of the accounting equation. Equity = Assets - Liability. Highest price IT CAN COMMAND = highest price including goodwill and all that jazz - value of restrictions that "devalues" and makes the deal less attractive.

I guess my question is... am I wrong to think that these conditions/requirements work in combination?

And pardon my crappy explanation....

I had the exact same reasoning as you for choosing C and Eliminating E. I can see Patrick's explanation as to why E could be considered right, but by the same token I don't see how C does not violate the second condition "MUST ENSURE that Citziens of Country F have majority ownership."

If they can't determine whether the citizens have majority ownership than they CANNOT ENSURE that they do. That seems to violate the rule pretty blatantly does it not?

[mjl246]

I reviewed all the posts and agree that (e) is more concrete. What really solidified (e) over (c) for me, however, is that answer choice (c) doesn't say that Country F WILL DEFINITELY sell PetroNat to World Oil Company. Answer choice (c) only details the info/consequences of World Oil's offer. I might be wrong, but I thought: if the government was definitely going to sell, then it would be in violation of condition 2 (ensure that citizens will have majority ownership). However, it doesn't say that (as it does in answer choice b).

In choice (a), it doesn't say StateAir will be sold to the corporation, but there's nothing in the choice to violate the conditions. Same with choice (d). (e) is fine because regardless of which company StateRail will be sold to, Country F will either violate condition 1 or condition 2.

[brettboresow]

mji246 - Thanks, that actually makes more sense seeing it explained that way. I definitely missed that, but can see how that would make it correct 100%.

[xiwang]

Hello

I made the same mistake choosing (C) over (E). Now I understand why I was wrong.

(C), only states facts about "the offer that is presented by the World Oil Company" (WOC has made... but WOC's ownership structure is so complex that...), but never states any response of the government to that offer. This is important.

[konamiyoxi]

My two cents on why C is wrong:

1. "One of the highest offers" ≠ Highest offer. Think about Columbia Law School being "one of the best law schools in the U.S." when arguably Yale is the best.

2. Even if these "highest offers" are indeed highest because they are all the same. Say $100m offer from 5 companies. The government therefore does not necessarily have to sell to World Oil Co., but could sell to Local Oil Co. who made the same $100m offer. Then answer choice C, which concerns about the ownership structure of World Oil Co., is no longer relevant, therefore does not violate requirements.

[KenM242]

My two cents on why C is wrong:

1. "One of the highest offers" ≠ Highest offer. Think about Columbia Law School being "one of the best law schools in the U.S." when arguably Yale is the best.

2. Even if these "highest offers" are indeed highest because they are all the same. Say $100m offer from 5 companies. The government therefore does not necessarily have to sell to World Oil Co., but could sell to Local Oil Co. who made the same $100m offer. Then answer choice C, which concerns about the ownership structure of World Oil Co., is no longer relevant, therefore does not violate requirements.

This is exactly what I thought.

The 5 choices are divided into 2 types:
1. Ones that specifies to which corporation country F will sell its company;
2. Ones that do NOT.

For ones that do not, country F has the option NOT to choose the corporation mentioned, therefore not breaking any rule. (C) is exactly that.

(C) does NOT say it will sell PetroNat to World Oil Company. It just says It will sell PetroNat to someone for sure, and World Oil Company is one of the candidates. World Oil Company isn't even the highest bidder! Plus, they don't know who owns exactly how much of it. In this case, unless WOC was THE HIGHEST bidder, country F will definitely delete WOC off its list of prospective buyers.

This is the only and correct reasoning behind why (C) is wrong.