For several years, per capita expenditure on prescription : GMAT Critical Reasoning (CR)
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# For several years, per capita expenditure on prescription

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For several years, per capita expenditure on prescription [#permalink]

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28 Nov 2011, 22:57
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45% (medium)

Question Stats:

61% (01:51) correct 39% (01:18) wrong based on 38 sessions

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For several years, per capita expenditure on prescription drugs in Voronia rose by fifteen percent or more annually. In order to curb these dramatic increases, the ministry of health prohibited drug manufacturers from raising any of their products’ prices. Even though use of prescription drugs did not expand after this price freeze, per capita expenditure for prescription drugs continued to increase by a substantial percentage each year.

Which of the following, if true, most helps to explain why the ministry’s action did not achieve its goal?

a) After price increases were prohibited, drug manufacturers concentrated on producing new medications to replace existing products

b) The population of Voronia rose steadily throughout the period.

c) Improvements in manufacturing processes enable drug manufacturers to maintain high profit levels on drugs despite the price freeze.

d) In addition to imposing a price freeze, the government encouraged doctors to prescribe generic versions of common drugs instead of the more expensive brand-name versions

e) After price increases were prohibited, some foreign manufacturers of expensive drugs ceased marketing them in Voronia.

OA is a. The reasoning for the answer a is that new medication is usually more expensive than existing products ?
Also, e is out od scope?
[Reveal] Spoiler: OA
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29 Nov 2011, 14:07
A is the only scenario out of proposed that could explain the paradox. New medicine does not have to be more expensive but it definitely can. Once new medicine is produced the manufacturer is not limited by new legislation to set the price to any value, even much greater than all current prices because it would not be considered price increase so it would not violate the new law. So if manufacturer replaces existing medicine with new more expensive one then he complies with the new law and the expenditures on medicine will indeed increase.
E - out of scope because nothing is said about what type(foreign or local) of manufacturers must freeze the prices so it must be inferred that everyone must freeze.Therefore no reason that people would buy more expensive drugs if they have not bought before.
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12 Dec 2011, 21:16
e) After price increases were prohibited, some foreign manufacturers of expensive drugs ceased marketing them in Voronia.=> the boldface only explains the usage of drug stop, but does not explain why per capital expenditure on drugs increase.
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01 Jan 2012, 21:45
I chose B,but explanations are good and now A makes sense.
Re: expenditure on prescription   [#permalink] 01 Jan 2012, 21:45
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