2012 CSAT, all questions

UPSC Prelims 2012 · CSAT

Question 36: Reading Comprehension

Passage – 3 · as printed by UPSC
Passage beginning “The need for Competition Law becomes…”

With reference to the passage, consider the following statements :

  1. 1.It is desirable that the impact of Foreign Direct Investment should be pro-competitive.
  2. 2.The entry of foreign investors invariably leads to the inflated prices in domestic markets.

Which of the statements given above is/are correct ?

a1 only
b2 only
cBoth 1 and 2
dNeither 1 nor 2

AnswerUPSC’s answer is (a).

The passage says FDI does not always strengthen competition, which is why competition law is needed to head off the harm from takeovers and mergers. That implies it is desirable for FDI's impact to be pro-competitive (statement 1). Statement 2 turns a possibility into a certainty: the passage says some acquisitions or mergers can lessen competition and push prices up, not that foreign entry invariably does. Watch for absolute words such as invariably.

  • 1. The concern is that FDI can weaken competition, so a competition-friendly impact is the desirable outcome.
  • 2. Higher prices are a possible result of reduced competition, not something that always follows foreign entry.

How you could have got this

  1. If you were sure statement 1 is correct, (b) and (d) go: each of them leaves 1 out.

    What you needed to know: The concern is that FDI can weaken competition, so a competition-friendly impact is the desirable outcome.

  2. Then, if you were sure statement 2 is not correct, (c) goes: it includes 2.

    What you needed to know: Higher prices are a possible result of reduced competition, not something that always follows foreign entry.

Only (a) is left. This one needs every statement.

Which options go is worked out from UPSC’s key and the options, not by a model.

Why each option is right or wrong
  • (a) Right. Only statement 1 follows from the passage.
  • (b) Wrong. Statement 2 overstates; the passage speaks of possible price rises, not invariable ones.
  • (c) Wrong. Statement 2 is false because of the word invariably.
  • (d) Wrong. Statement 1 does follow.

Answer: UPSC’s key. Explanation: written by UPSC Grade, not by UPSC.

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Source: UPSC, Civil Services (Preliminary) Examination 2012, General Studies Paper II (CSAT), Series A. The paper on upsc.gov.in.