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A severe drought can actually lessen the total amount of [#permalink]
12 Jan 2012, 02:12
71% (02:46) correct
28% (02:07) wrong based on 81 sessions
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.
In this question we have to resolve the paradox, i.e. how is it that during times of drought farmers are given less governmental aid.
The argument tells us the stipulations by which farmers receive aid: the government pays them x dollars, where x represents the difference in a preset price and the price at which farmers actually sell their crops
For example, if the government sets a price of $10/barrel of corn, and farmers are only able to sell their corn at $8/barrel, the government will pay them the difference.
According to the prompt, there is a drought in 1983, and while it may seem reasonable that the government will have to help the farmers, that is not the case. The question asks us to choose an answer that can account for this discrepancy.
(A) INCORRECT This answer fails to account for the paradox because it states that the government set the preset price so high that farmers were likely not to be able sell their crops at such a price. Therefore, the government would have to provide aid (its incentive would be to help farmers struggling with debt).
(B) INCORRECT We are not concerned with the amount of food exported but the price of food. Out of scope.
(C) CORRECT This answer choice gives a reason why a drought year would actually drive the price of crops higher than usual (and thus higher than the government preset price).
Think of it this way: corns was rare in the drought year (1983) so the market price was drive up to $15. If the preset price reflects a typical year, it is going to be much lower (say $10).
Therefore the government does not have to provide as much aid and the overall aid drops compared to that of the previous year.
(D) INCORRECT This focuses on 1984 and fails to account for why the government paid farmers less during the drought year of 1983. Out of scope.
(E) INCORRECT The argument does not discuss retail prices but the prices farmers sell their crops at (market value). Out of scope.
+1 for C. I spent little over 2 mins on this problem. I knew the answer was C around 1:10 but spent the extra time rereading answer choices and the Q stem/ info from stimulus in regards to what US aid is based on