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# For several years, per capita expenditure on prescription

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Veritas Prep GMAT Instructor
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Re: For several years, per capita expenditure on prescription [#permalink]

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11 Apr 2012, 10:56
Expert's post
Is this a Weaken or resolve the paradox question?

It seems to me that it is a resolve since we have two contradicting sets of facts. But what makes this a possibility for a weaken question is that it has a conclusion.

Any help to explain what question type this is?

It is a 'resolve the paradox' question. There is a paradox here:
There is price freeze and more medicine is not being sold. Still, per capita expenditure is increasing.
You have to explain the paradox.
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Get started with Veritas Prep GMAT On Demand for $199 Veritas Prep Reviews Intern Joined: 05 Jun 2012 Posts: 1 Followers: 0 Kudos [?]: 0 [0], given: 4 Re: For several years, per capita expenditure on prescription [#permalink] ### Show Tags 02 Jul 2012, 11:32 "the ministry of health prohibited drug manufacturers from raising any of their products’ prices." That one word, "raising", hold the key to this question. They can't RAISE the price, but they can make new ones at a higher price. Thus, answer choice A. Sneaky b@$t@rd$. facebook/testprepster Director Status: Final Countdown Joined: 17 Mar 2010 Posts: 563 Location: India GPA: 3.82 WE: Account Management (Retail Banking) Followers: 16 Kudos [?]: 230 [0], given: 75 Re: For several years, per capita expenditure on prescription [#permalink] ### Show Tags 02 Jul 2012, 11:47 Govt.banned the price hike on(say 100 ) medicines ....manufacturers found that the sales will not give them a substantial profit margin which has been around 15% every year SO, THEY STARTED manufacturing new medicines, not listed in those 100 medicines list and hence the per capita expenditure on prescription kept increasing. +1 for (A) _________________ " Make more efforts " Press Kudos if you liked my post Manager Joined: 05 Jun 2012 Posts: 130 Schools: IIMA Followers: 1 Kudos [?]: 8 [0], given: 66 For several years, per capita expenditure on prescription [#permalink] ### Show Tags 31 Jul 2014, 04:09 I think A and C are good options But if you look at last line :per capita expenditure for prescription drugs continued to increase by a substantial percentage each year. Continued increase is possible by bringing new product and by improving technology(* technology can be improved to at some level) So A is correct!!! _________________ If you are not over prepared then you are under prepared !!! Manager Status: Please do not forget to give kudos if you like my post Joined: 19 Sep 2008 Posts: 128 Location: United States (CA) Followers: 0 Kudos [?]: 65 [0], given: 257 Re: For several years, per capita expenditure on prescription [#permalink] ### Show Tags 30 Nov 2014, 19:31 D is wrong for following reason. If the price of prescription drugs did not change how would prescribing generic drug increase the per capita expenditure? actually it will decrease significantly because these are generally cheaper, but one must not bring in this generic and premium concept here, but the point is it will not increase so the statement does nothing. A says that manufacturer did not raise prices of existing drugs as prohibited by law but instead came up with different drugs which replaced existing for which no law existed now since argument says per capita expenditure increase (take that as a must be true conclusion) these drugs were expensive then existing ones. remember in these kind of question we do not have to look for 100% likely even 5% likelihood is enough for the answer to be correct. GMAC is awesome in coming up with these kinds of question. Answer: A cialit0506 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 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. I cannot get my head round the reasonings of the OA. No matter how I look at it, D seems the best answer. If D is true, wouldn’t per capita expenditure of drugs increase? _________________ Please Help with Kudos, if you like my post. [Reveal] Spoiler: Intern Joined: 19 Jul 2014 Posts: 1 Followers: 0 Kudos [?]: 0 [0], given: 1 Re: For several years, per capita expenditure on prescription [#permalink] ### Show Tags 14 Oct 2015, 08:19 But how is it implied that new drugs will be costlier as compared to the old one? Please explain. Thanks Veritas Prep GMAT Instructor Joined: 16 Oct 2010 Posts: 6578 Location: Pune, India Followers: 1791 Kudos [?]: 10774 [0], given: 211 Re: For several years, per capita expenditure on prescription [#permalink] ### Show Tags 14 Oct 2015, 22:51 Expert's post Pavas786 wrote: But how is it implied that new drugs will be costlier as compared to the old one? Please explain. Thanks You are given: "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" The use of drugs remained the same, price did not increase so how come per capita expenditure continued to increase? If people are still using 10 tabs a month and the price of the 10 tabs is still the same, why are they paying more? Because the 10 tabs they are consuming now are different from the previous 10 tabs and are more expensive than the previous ones. The manufacturers are replacing existing products with new medicines - the price of which they can keep according to what suits them. They are pricing them higher and that is how the expense of medicines is increasing. _________________ Karishma Veritas Prep | GMAT Instructor My Blog Get started with Veritas Prep GMAT On Demand for$199

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

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15 Jan 2016, 01:09
If we introduce a new product at a very high price, we can’t be accused of ‘increasing’ the price … increase happens on an existing price.

"Per-capita expenditure" is the total price paid for drugs (price per pill * # of pills) divided by the number of people. If the per capita expenditure is increasing, either the numerator has to be increasing or the denominator has to be decreasing or both. So, either the price is increasing, the number of pills is increasing. Premise: product prices can't be raised (note: by definition, this only addresses existing products; new products not yet introduced do not yet have assigned prices). So I can't raise the price of existing products, but I could introduce more expensive products. Premise: the use of prescription drugs did not increase after the price freeze. So the number of pills isn't changing.

A. new medications = new price introductions. If these prices are higher than the prices for the old products, then that's how I can increase the numerator of my "per capita expenditure" calculation.

B. if this changes anything, it would decrease the per capita expenditure (if the new people didn't take any drugs) - though the more reasonable assumption is that the new people are taking drugs at the same rate as the old people, meaning there's no change in per capita expenditure. Either way, per capita expenditure is not increasing.

C. we're concerned with why the per capita expenditure is still increasing and profit levels don't affect that calculation.

D. the government can encourage anything it wants - that doesn't mean it happened. And, anyway, if the government were to be successful in this plan, the action should have lowered per capita expenditure, not increased it!

E. This would decrease the per capita expenditure (people aren't buying as many of the expensive drugs anymore)

For Paradox questions, conventional approach works the best.
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Re: For several years, per capita expenditure on prescription [#permalink]

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26 Apr 2016, 12:54
This is a resolve the discrepancy or explain the situation problem.

Conc: Although use of prescription drugs did not expand after this price freeze, per capita expenditure for prescription drugs, which was rising by 15% annually, continued to increase by a substantial percentage each year.

Pre-thinking: We are given that MOH prohibited drug manufacturers from raising any of their products' prices. So premise talks about the price freeze on exisiting products. But what about the new products which drug manufacturers can launch at increased prices.

A. After price increases were prohibited, drug manufacturers concentrated on producing new medications to replace existing products.
This is inline with pre-thinking. Should be the ans.

B. The population of Voronia rose steadily throughout the period.

Doesn't matter. We are talking about per-capita expenditure anyways and not the total expenditure by the population.

C. Improvements in manufacturing processes enabled drug manufacturers to maintain high profit levels on drugs despite the price freeze.

high profits don't explain increase in per capita expenditure. Eliminate.

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.

Encourage doesn't mean that doctors actually prescribed. Further since expensive versions were discouraged then why per-capita expenditure still increased. Doesn't explain.

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

Again doesn't explain the increase in per capita expenditure on these prescription drugs.
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Re: For several years, per capita expenditure on prescription   [#permalink] 26 Apr 2016, 12:54

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