(A) Correct.

It’s quite easy to reject this option by saying that the passage doesn’t give us any information about the profit margins of these industries.

Many people look at just one or two words in an option and reject the option saying, “The passage nowhere talks about these things. Out!”

As the current case suggests, this way of rejecting options is flawed. You may be following this strategy in many cases and getting by. If so, it may be hard for you to accept that this way of reasoning is flawed.

You’re perhaps wondering, “If this way is flawed, why does it work most of the time?”

This way of reasoning works most of the time because 80% of the options in a CR question are incorrect (i.e., 4 out of 5 options are incorrect). Thus, even if you have flawed reasoning to reject the options, you will get by a lot of time.

****

Now, let’s try to understand why this option is correct.

You may realize that this option is a negative statement; it says that something is not the case.

It says that profit margins were not high enough to absorb the rise in costs mentioned above.

To reject an option in an inference question, you need to be sure that the negation of the option is possible.

Only then can you say that this option cannot be concluded or inferred (because the negation is also possible)

What would be the negation of this statement?

The negation will be:

Profit margins in those industries were high enough to absorb the rise in costs mentioned above.

Is the above case possible?

Is it possible that profit margins in those industries were high enough to absorb the rise in costs mentioned above?

No. It’s not possible, since we’re given that the increase in costs sharply limited the ability of these industries to compete effectively.

If the profit margins were high enough to absorb the rise in costs, the increase in costs will not have sharply limited the ability of these industries to compete effectively.

Since the opposite of this option is not possible, we can conclude this option from the given passage.

(B) Incorrect. 

I sense that some people mark this option thinking, “If country Z bans some imports from other countries, isn’t it logical to expect that other countries would also ban imports from country Z?”

I’ll agree that there is a chance that other countries would reciprocate. However, can we conclude this from the passage?

The answer is No. To conclude, we need not only indication but very strong support.

***

I believe that some people mark this option believing that it supports the final statement in the passage. If so, these people have misread the question – the question asks to find an option that is supported by the passage, NOT an option that supports the passage.

(C) Incorrect. 

There’s absolutely no indication that these industries expanded the domestic market for their products.

Of course, given that their ability to compete in the export markets is diminished, there is a chance that these industries would have wanted to expand in the domestic market.

However, we cannot conclude even the idea that these industries tried to expand the domestic market for their products. It is entirely possible that they continued to focus on the export markets.

(D) Incorrect. 

There’s absolutely no indication in the passage that such steps were taken. (If you marked option D, my hunch is that you had forgotten that you were solving an inference question)

Perhaps, no steps to offset rising material costs were taken.

Or, even if such steps were taken, the steps might not have included decreasing labor costs.

(E) Incorrect. 

There’s absolutely no indication in the passage that these industries moved into any new export markets. Perhaps, they continued to focus on the existing markets – by improving their products or distribution, by changing their brand image, or by some cost-cutting.