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A severe drought can actually lessen the total amount of

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A severe drought can actually lessen the total amount of [#permalink] New post 02 Jan 2011, 15:45
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A severe drought can actually lessen the total amount
of government aid that United States farmers receive
as a group. The government pays farmers the amount,
if any, by which the market price at which crops are
actually sold falls short of a preset target price per
bushel for the crops. The drought of 1983, for example,
caused farm-program payments to drop by $10 billion.

Given the information above, which of the following,
if true, best explains why the drought of 1983 resulted
in a reduction in farm-program payments?
(A) Prior to the drought of 1983, the government
raised the target price for crops in order to aid
farmers in reducing their debt loads.
(B) Due to the drought of 1983, United States farmers
exported less food in 1983 than in the preceding year.
(C) Due to the drought of 1983, United States
farmers had smaller harvests and thus received
a higher market price for the 1983 crop than
for the larger crop of the preceding year.
(D) Due to the drought of 1983, United States
farmers planned to plant smaller crops in 1984
than they had in 1983.
(E) Despite the drought of 1983, retail prices for food
did not increase significantly between 1982 and 1983.

did not get the reasoning behind the ans.
[Reveal] Spoiler: OA

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Re: A severe drought can actually lessen [#permalink] New post 02 Jan 2011, 18:19
ajit257,

The question here asks you to explain why the 1983 drought caused a drop in payments. In other words, you need to explain the logic behind why a drought can actually decrease the payments from the US government.

The premises here state that the government pays farmers the difference between some preset target price and the actual sales price.

With questions that ask you to "explain an event" you want to restate the question to be as explicit as possible. In this example: You're really looking for an explanation of why the payments decreased. According to the premises, payments decrease when the two prices converge. So the question really becomes: "Why did the drought of 1983 cause the target price and the market price to converge?"

A: If the government had raised the target price and the sales price stayed the same (we have no information to the contrary), then the payments would have actually been higher.
B: If the farmers exported less food, then they made less money. However, the subsidies relate to the price of food. If this smaller quantity of food fetched a higher price, then the payments could have been smaller. However, if it was sold on the cheap, the subsidies might have even been higher. We have no information about price here.
C: This tells us that the market price increased. This would have brought it closer to the target price, thus decreasing the difference and therein the subsidies. Correct.
D: We don't care about 1984. The question asks us about the situation in 1983.
E: The fact that prices didn't increase that much means that the difference between the target price and the sales price would have been pretty constant. In the absence of data about the volume, we can't guess about the total amount paid out.

Make sense?

Bret
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Re: A severe drought can actually lessen [#permalink] New post 03 Jan 2011, 17:58
thanks Bret,
i actually thought about it. Took long to understand it. Any way i can tackle such questions within 2 min.
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Re: A severe drought can actually lessen [#permalink] New post 04 Jan 2011, 05:01
This question cost me 4:37
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Re: A severe drought can actually lessen [#permalink] New post 04 Jan 2011, 06:41
BKimball wrote:
ajit257,

The question here asks you to explain why the 1983 drought caused a drop in payments. In other words, you need to explain the logic behind why a drought can actually decrease the payments from the US government.

The premises here state that the government pays farmers the difference between some preset target price and the actual sales price.

With questions that ask you to "explain an event" you want to restate the question to be as explicit as possible. In this example: You're really looking for an explanation of why the payments decreased. According to the premises, payments decrease when the two prices converge. So the question really becomes: "Why did the drought of 1983 cause the target price and the market price to converge?"

A: If the government had raised the target price and the sales price stayed the same (we have no information to the contrary), then the payments would have actually been higher.
B: If the farmers exported less food, then they made less money. However, the subsidies relate to the price of food. If this smaller quantity of food fetched a higher price, then the payments could have been smaller. However, if it was sold on the cheap, the subsidies might have even been higher. We have no information about price here.
C: This tells us that the market price increased. This would have brought it closer to the target price, thus decreasing the difference and therein the subsidies. Correct.
D: We don't care about 1984. The question asks us about the situation in 1983.
E: The fact that prices didn't increase that much means that the difference between the target price and the sales price would have been pretty constant. In the absence of data about the volume, we can't guess about the total amount paid out.

Make sense?

Bret

Hi Bret we all know that during a Drought, there is always a reduction in the volume of Crops harvested.,so Why cant we use this information to eliminate E.Isnt this info outside information ? But also isnt this info a General Knowledge
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Re: A severe drought can actually lessen [#permalink] New post 05 Jan 2011, 07:37
Hi Bret,
I also wanted to know if these 2 types of questions are treated as inference types... Please can someone clarify.

If the information above is true, it best supports which of the following hypotheses?
Which one of the following is best supported on the basis of the information above?
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Re: A severe drought can actually lessen [#permalink] New post 06 Jan 2011, 03:31
Resolve the paradox question. Ans must be C
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Re: A severe drought can actually lessen [#permalink] New post 15 Jan 2011, 09:18
I think C is correct and I picked it intuitively. The others are somewhat irrelevant in my reasoning.
Maybe intuition sometimes works for hard questions :D
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Re: A severe drought can actually lessen [#permalink] New post 20 Jan 2011, 03:51
C in 2 secs.
In THAT is a 700+ question (what year?), show me some level-500 questions please :)
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Re: A severe drought can actually lessen [#permalink] New post 20 Jan 2011, 20:50
C it is. Took more time to understand, but less to solve.
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Re: A severe drought can actually lessen [#permalink] New post 21 Jan 2011, 05:55
This is like a question from ECO101 class.
When the quantity supplied decreases, while the quantity demanded remains the same, the price rises.
When the government compensates farmers by the ammount by which the market prices are lower than the target prices, the rise of market prices brings smaller difference, therefore smaller payments from government.

Also C
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Re: A severe drought can actually lessen [#permalink] New post 13 Apr 2011, 21:13
The answer is C.
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Re: A severe drought can actually lessen [#permalink] New post 26 Apr 2011, 11:14
C is the answer, but it is really funny that these easy CR questions take 2 odd minutes. if you get them right, no big gains, but if you get them wrong , you lose heavily on the gmat.
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Re: A severe drought can actually lessen [#permalink] New post 20 May 2011, 06:27
between A and C, C gives the reason that because of drought the prices increased in fact.
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Re: A severe drought can actually lessen   [#permalink] 20 May 2011, 06:27
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