Q50) China uses its scarce foreign-exchange reserves to buy scrap iron for recycling into steel. Although the steel thus produced earns more foreign exchange than it costs, that policy is foolish. China’s own territory has vast deposits of iron ore, which can be mined with minimal expenditure of foreign exchange.
Which of the following, if true, provides the strongest support for China’s policy of buying scrap iron abroad?
Q50) China uses its scarce foreign-exchange reserves to buy scrap iron for recycling into steel. Although the steel thus produced earns more foreign exchange than it costs, that policy is foolish. China’s own territory has vast deposits of iron ore, which can be mined with minimal expenditure of foreign exchange.
Which of the following, if true, provides the strongest support for China’s policy of buying scrap iron abroad?
The correct option is D d) Furnaces that process scrap iron can be built and operated in China with substantially less foreign exchange than can furnaces that process iron ore.
Ans:50) (d)
Sol: Choice (d), the best answer, furnishes two pieces of information that together support the policy. First, furnaces that process scrap iron may be unable to process iron ore. Second, obtaining and operating furnaces that can process iron ore would require substantially more foreign exchange, thus possibly offsetting any advantage from processing domestic iron ore.
The possibility of increases in scrap iron’s price (choice a) speaks against the policy. The vulnerability of China’s foreign-exchange reserves (choice b) emphasizes the need to conserve foreign exchange, but does not indicate which mode of steel production best accomplishes this. Choice (c) is neutral between the modes production.
Ans:50) (d)
Sol: Choice (d), the best answer, furnishes two pieces of information that together support the policy. First, furnaces that process scrap iron may be unable to process iron ore. Second, obtaining and operating furnaces that can process iron ore would require substantially more foreign exchange, thus possibly offsetting any advantage from processing domestic iron ore.
The possibility of increases in scrap iron’s price (choice a) speaks against the policy. The vulnerability of China’s foreign-exchange reserves (choice b) emphasizes the need to conserve foreign exchange, but does not indicate which mode of steel production best accomplishes this. Choice (c) is neutral between the modes production.
