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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]  09 Aug 2012, 01:10
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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.
[Reveal] Spoiler: OA
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Re: GMATPrep CR #8 : need help/explanation [#permalink]  09 Aug 2012, 02:32
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Assume, there were 100 different types of medicines available in the market on which govt. froze the prices(that a particular drug will cost $X, and no chemist or druggist can charge more than the fixed price on the drug).It is also mentioned that the consumption of drugs stayed constant.Then how can the per capita expenditure for prescription drugs continued to increase by a substantial percentage each year? May possible that the drug manufacturers started making more variety of drugs.(The listed drugs were 100 now 150; 50 new varieties are in market , and govt is unaware of those 5o drugs but the chemists are charging more and more for those new medicines.)hence per capita expenditure for prescription drugs continued to increase by a substantial percentage each year. _________________ " Make more efforts " Press Kudos if you liked my post Intern Joined: 09 May 2012 Posts: 17 Location: Thailand Concentration: Finance, Economics GMAT Date: 08-30-2012 GPA: 2.64 WE: Research (Retail Banking) Followers: 0 Kudos [?]: 22 [1] , given: 3 Re: GMATPrep CR #8 : need help/explanation [#permalink] 09 Aug 2012, 02:42 1 This post received KUDOS oh i get it. So the gov only restricted the price increase for 'current' drugs produced by the drug company. So technically the drug company could produce 'new' drugs and charge however much they want for it? Thanks thevenus Director Status: Final Countdown Joined: 17 Mar 2010 Posts: 564 Location: India GPA: 3.82 WE: Account Management (Retail Banking) Followers: 13 Kudos [?]: 165 [1] , given: 75 Re: GMATPrep CR #8 : need help/explanation [#permalink] 09 Aug 2012, 02:44 1 This post received KUDOS naruphanp wrote: oh i get it. So the gov only restricted the price increase for 'current' drugs produced by the drug company. So technically the drug company could produce 'new' drugs and charge however much they want for it? Thanks thevenus Absolutely right ! your kudos is always welcome ! _________________ " Make more efforts " Press Kudos if you liked my post Manager Joined: 31 Aug 2011 Posts: 211 Followers: 3 Kudos [?]: 58 [0], given: 49 Re: GMATPrep CR #8 : need help/explanation [#permalink] 10 Aug 2012, 06:28 well E can be a good option but required farther leap than a . if foreign manufactureres charged less than domestic for these drugs then after they went out, avg prices could increase . in A it is nowhere mentioned that the regulation was for existing drugs only but the newer ones might be costlier than existing ones, this also requires a further leap than what is mentioned . . The point i want to make is that in such ques on CR where two answers are possible both require a further leap from whats stated, how to select the correct answer ?? is there any strategy ? expert reply will be higly appreciated . _________________ If you found my contribution helpful, please click the +1 Kudos button on the left, I kinda need some =) Current Student Status: Now or never Joined: 07 Aug 2010 Posts: 328 Location: India Concentration: Strategy, Technology GPA: 3.5 WE: Consulting (Consulting) Followers: 7 Kudos [?]: 159 [0], given: 27 Re: GMATPrep CR #8 : need help/explanation [#permalink] 11 Aug 2012, 23:22 thevenus wrote: Assume, there were 100 different types of medicines available in the market on which govt. froze the prices(that a particular drug will cost$X, and no chemist or druggist can charge more than the fixed price on the drug).It is also mentioned that the consumption of drugs stayed constant.Then how can the per capita expenditure for prescription drugs continued to increase by a substantial percentage each year?

May possible that the drug manufacturers started making more variety of drugs.(The listed drugs were 100 now 150; 50 new varieties are in market , and govt is unaware of those 5o drugs but the chemists are charging more and more for those new medicines.)hence per capita expenditure for prescription drugs continued to increase by a substantial percentage each year.

How is the price of drug and expenditure related?
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Re: For several years, per capita expenditure on prescription [#permalink]  02 Feb 2013, 03:26
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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
Any of the existing products cannot have increased price. But if there were more new products introduce, then perhaps these contributed to the increase in per capita presc. drug prescription. Sneak manufacturers! CORRECT!

B. The population of Voronia rose steadily throughout the period.
Since it is about the per capita, then the total population doesn't matter. And say this increase are non-prescription users, then that would not explain the increase in per capita...

C. Improvements in manufacturing processes enable drug manufacturers to maintain high profit levels on drugs despite the price freeze.
Profits are irrelevant.

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
This should decrease rather than increase...

E. After price increases were prohibited, some foreign manufacturers of expensive drugs ceased marketing them in Voronia.
This should decrease rather than increase

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Re: For several years, per capita expenditure on prescription [#permalink]  03 Sep 2013, 07:56
mbaiseasy wrote:
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
Any of the existing products cannot have increased price. But if there were more new products introduce, then perhaps these contributed to the increase in per capita presc. drug prescription. Sneak manufacturers! CORRECT!

B. The population of Voronia rose steadily throughout the period.
Since it is about the per capita, then the total population doesn't matter. And say this increase are non-prescription users, then that would not explain the increase in per capita...

C. Improvements in manufacturing processes enable drug manufacturers to maintain high profit levels on drugs despite the price freeze.
Profits are irrelevant.

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
This should decrease rather than increase...

E. After price increases were prohibited, some foreign manufacturers of expensive drugs ceased marketing them in Voronia.
This should decrease rather than increase

But for (a) , once the manufacturers make new replaced drugs , these no more remain as prescribed drugs right?
Then how does per capita expenditure for prescription drugs still continue to increase?
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Re: For several years, per capita expenditure on prescription [#permalink]  05 Sep 2014, 08:57
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Re: For several years, per capita expenditure on prescription [#permalink]  20 Sep 2014, 00:04
Hi all,

In the stem it says that "...prohibited drug manufacturers from raising any of their products’ prices" doesn't it include the new drugs as well?

Thanks
Katia
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Re: For several years, per capita expenditure on prescription [#permalink]  20 Sep 2014, 00:18
krikatkat wrote:
Hi all,

In the stem it says that "...prohibited drug manufacturers from raising any of their products’ prices" doesn't it include the new drugs as well?

Thanks
Katia

Hi, Is the Q in the context of option A.?
A. After price increases were prohibited, drug manufacturers concentrated on producing new medications to replace existing products.

Anyways, new medication would have new pricing based upon different factors such as R&D, tech used etc.
Regards.
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Re: For several years, per capita expenditure on prescription   [#permalink] 20 Sep 2014, 00:18
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