Transnational cooperation among corporations is experiencing a model renaissance among United States firms, even though projects undertaken by two or...

GMAT Critical Reasoning : (CR) Questions

Source: Official Guide

Critical Reasoning

Inference

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Transnational cooperation among corporations is experiencing a model renaissance among United States firms, even though projects undertaken by two or more corporations under a collaborative agreement are less profitable than projects undertaken by a single corporation. The advantage of transnational cooperation is that such joint international projects may allow United States firms to win foreign contracts that they would not otherwise be able to win.

Which of the following statements by a United States corporate officer best fits the situation of United States firms as described in the passage above?

We would rather make only a share of the profit and also risk only a share of a possible loss than run the full risk of a loss.

We would rather make a share of a relatively modest profit than end up making none of a potentially much bigger profit.

We would rather cooperate and build good will than poison the business climate by all-out competition.

We would rather have foreign corporations join us in American projects than join them in projects in their home countries.

We would rather win a contract with a truly competitive bid of our own than get involved in less profitable collaborative agreements.

Solution

Passage Visualization

Passage Statement	Visualization and Linkage
Transnational cooperation among corporations is experiencing a model renaissance among United States firms	Establishes Current Trend: US firms are increasingly engaging in transnational cooperation Example: 2024 sees 30% more US-international partnerships than 2020 This represents a revival of collaborative international business models
projects undertaken by two or more corporations under a collaborative agreement are less profitable than projects undertaken by a single corporation	Establishes Financial Reality: Collaborative projects = Lower profits per project Solo projects = Higher profits per project Concrete example: Solo project yields $10M profit vs. collaborative project yields $6M profit This creates an apparent paradox with the increasing trend
The advantage of transnational cooperation is that such joint international projects may allow United States firms to win foreign contracts that they would not otherwise be able to win	Explains Strategic Logic: Key insight: Access to otherwise impossible opportunities Collaboration = gateway to previously unreachable markets Example: $6M profit from accessible collaborative project vs. $0 profit from impossible solo project "Would not otherwise be able to win" indicates absolute necessity of partnership
Overall Implication	The Profitability Paradox Resolved: US firms accept lower per-project profits through collaboration because: Solo approach: Higher profit margins but zero access to certain markets Collaborative approach: Lower profit margins but access to previously impossible contracts Strategic trade-off: Some profit is better than no profit when market access requires partnership

Valid Inferences

Inference: US corporate officers must be willing to accept reduced profitability per project in exchange for gaining access to foreign contracts that would be completely unattainable through solo efforts.

Supporting Logic: Since collaborative projects are less profitable than solo projects, yet transnational cooperation is experiencing a renaissance among US firms, and since the stated advantage is winning contracts "that they would not otherwise be able to win," US firms are demonstrating a strategic preference for lower-margin accessible opportunities over higher-margin impossible opportunities.

Clarification Note: The passage supports that firms are trading profit margin for market access, but does not specify the underlying reasons why certain foreign contracts require collaborative approaches rather than solo bids.

Answer Choices Explained

We would rather make only a share of the profit and also risk only a share of a possible loss than run the full risk of a loss.

This focuses on risk management and loss mitigation, but the passage doesn't discuss risk or potential losses at all. The passage is specifically about profitability differences and market access, not about sharing financial risks. This doesn't capture the core dynamic described.

We would rather make a share of a relatively modest profit than end up making none of a potentially much bigger profit.

This perfectly captures the trade-off described in the passage. The 'share of a relatively modest profit' represents the lower profitability of collaborative projects, while 'making none of a potentially much bigger profit' represents the reality that solo projects, though more profitable per project, would yield zero profit because US firms 'would not otherwise be able to win' these foreign contracts without collaboration. This directly reflects the strategic reasoning behind the renaissance in transnational cooperation.

We would rather cooperate and build good will than poison the business climate by all-out competition.

This focuses on relationship-building and avoiding competitive conflict, but the passage doesn't mention goodwill or business climate concerns. The motivation described is purely about gaining access to otherwise unwinnable contracts, not about maintaining positive relationships or avoiding competition.

We would rather have foreign corporations join us in American projects than join them in projects in their home countries.

This reverses the situation described in the passage. The passage specifically discusses US firms engaging in 'joint international projects' to win 'foreign contracts,' which implies US firms are participating in projects abroad, not bringing foreign firms to American projects.

We would rather win a contract with a truly competitive bid of our own than get involved in less profitable collaborative agreements.

This directly contradicts the passage. The passage describes a renaissance in transnational cooperation, meaning US firms are actively choosing collaborative agreements despite their lower profitability. This choice suggests preference for solo competitive bids, which is the opposite of the described trend.

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