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A severe drought can actually lessen the total amount of [#permalink]
 04 Dec 2009, 08:15
Question Stats:
33% (00:00) correct
66% (00:58) wrong based on 0 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.
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Re: A severe drought can actually lessen [#permalink]
04 Dec 2009, 09:07
I go with C
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Re: A severe drought can actually lessen [#permalink]
04 Dec 2009, 11:08
C should be the answer.
We need to resolve the contradiction that a severe drought can actually lower the government's payout to farmers. The question also states that the subsidy the gov't pays is dependent on the price difference btw a target price and actual price per bushel. Answer C states that during the drought actual prices went up. Therefore, closing the gap btw targe price and actual price, and lowering gov't payout.
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Re: A severe drought can actually lessen [#permalink]
19 May 2010, 01:24
If the mk prices were higher then the diff b/w target prices and mkt prices will be more and more the diff, the higher would be the amount govt paid to the farmers. I am still not clear with C. Can anyone explain this? 11MBA wrote: C should be the answer.
We need to resolve the contradiction that a severe drought can actually lower the government's payout to farmers. The question also states that the subsidy the gov't pays is dependent on the price difference btw a target price and actual price per bushel. Answer C states that during the drought actual prices went up. Therefore, closing the gap btw targe price and actual price, and lowering gov't payout.
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Re: A severe drought can actually lessen [#permalink]
19 May 2010, 09:04
should be C.
goverment pays the difference between the preset target price and the market price per bushel to the farmers as part of the farm-program payment.
payment = target price - market price
so higher the difference higher the payment and lower the difference lower the payment.
premise says that farmers were paid low in the drought year.
so obviously the difference between the preset target price and the market price was lower
this differnce (target price - market price) will belower only if the target price is low or the market price is higher.
option C says that ==> 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.
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Re: A severe drought can actually lessen
[#permalink]
19 May 2010, 09:04
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