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# In 1960, 10 percent of every dollar paid in automobile

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Manager
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In 1960, 10 percent of every dollar paid in automobile [#permalink]

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20 Jan 2008, 08:23
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In 1960, 10 percent of every dollar paid in automobile insurance premiums went to pay costs arising from injuries incurred in car accidents. In 1990, 50 percent of every dollar paid in automobile insurance premiums went toward such costs, despite the fact that cars were much safer in 1990 than in 1960.

Which of the following, if true, best explains the discrepancy outlined above?
(A) There were fewer accidents in 1990 than in 1960.
(B) On average, people drove more slowly in 1990 than in 1960.
(C) Cars grew increasingly more expensive to repair over the period in question.
(D) The price of insurance increased more rapidly than the rate of inflation between 1960 and 1990.
(E) Health-care costs rose sharply between 1960 and 1990.

Also, in general, what does it mean when price of something increased more rapidly than the rate of inflation?
Director
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20 Jan 2008, 08:52
A higher percentage of costs is going toward INJURIES...this means that injuries are getting more expensive to treat, and E is the right choice.
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20 Jan 2008, 08:58
E

we need to find the reason that contributed to increase in healthcare costs

> Price of insurance increased more rapidly than rate of inflation
Let's say as per 'increase in rate of inflation' the premium price should have increased to $1000/annum in 1990 but instead it was$1500/annum.
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20 Jan 2008, 09:10
seongbae wrote:
In 1960, 10 percent of every dollar paid in automobile insurance premiums went to pay costs arising from injuries incurred in car accidents. In 1990, 50 percent of every dollar paid in automobile insurance premiums went toward such costs, despite the fact that cars were much safer in 1990 than in 1960.

Which of the following, if true, best explains the discrepancy outlined above?
(A) There were fewer accidents in 1990 than in 1960.
(B) On average, people drove more slowly in 1990 than in 1960.
(C) Cars grew increasingly more expensive to repair over the period in question.
(D) The price of insurance increased more rapidly than the rate of inflation between 1960 and 1990.
(E) Health-care costs rose sharply between 1960 and 1990.

Also, in general, what does it mean when price of something increased more rapidly than the rate of inflation?

E it is. If cars are more safer today than in 1960's then there must be lesser number of accidents. And even if the accidents are lower but proportion of dollar spent on medical care is high then it clearly indicates that medical cost has become costly...
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20 Jan 2008, 12:21
(A) There were fewer accidents in 1990 than in 1960. (This weakens the argument – Eliminate it)

(B) On average, people drove more slowly in 1990 than in 1960. (This weakens the argument – eliminate it)

(C) Cars grew increasingly more expensive to repair over the period in question. (This sounds correct, but argument explicitly mentions “insurance premiums went to pay costs arising from injuries incurred in car accidents” – Eliminate it)

(D) The price of insurance increased more rapidly than the rate of inflation between 1960 and 1990. (Rate of inflation is not discussed in the argument – Eliminate it)

(E) Health-care costs rose sharply between 1960 and 1990. (This may explain why insurance costs are high – Hold it)

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Re: In 1960, 10 percent of every dollar paid in automobile [#permalink]

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14 Oct 2013, 07:59
seongbae wrote:
In 1960, 10 percent of every dollar paid in automobile insurance premiums went to pay costs arising from injuries incurred in car accidents. In 1990, 50 percent of every dollar paid in automobile insurance premiums went toward such costs, despite the fact that cars were much safer in 1990 than in 1960.

Which of the following, if true, best explains the discrepancy outlined above?
(A) There were fewer accidents in 1990 than in 1960.
(B) On average, people drove more slowly in 1990 than in 1960.
(C) Cars grew increasingly more expensive to repair over the period in question.
(D) The price of insurance increased more rapidly than the rate of inflation between 1960 and 1990.
(E) Health-care costs rose sharply between 1960 and 1990.

Also, in general, what does it mean when price of something increased more rapidly than the rate of inflation?

The key word here is INJURIES. Car's are not injured, they are damaged.
So it has to be talking about Health-care costs.
That is why E over C

Hope it helps
J
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Re: In 1960, 10 percent of every dollar paid in automobile [#permalink]

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17 Oct 2013, 22:40
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This post was
BOOKMARKED
(A) There were fewer accidents in 1990 than in 1960. ---Incorrect, this is opposite to what we need. More money in less accidents does not solve the discrepancy.
(B) On average, people drove more slowly in 1990 than in 1960. ---- Completely irrelevant.
(C) Cars grew increasingly more expensive to repair over the period in question. --- Incorrect, we are not concerned about price of the car repair. Not related to accidents and injuries.
(D) The price of insurance increased more rapidly than the rate of inflation between 1960 and 1990. ---- Again it does not explain why more money went into injuries from accidents even though the cars were safer.
(E) Health-care costs rose sharply between 1960 and 1990. --- Finally got what we want. An increase in health care suggests that if in 1960 $10 from$100 went into injuries from accidents. Now the same injuries to cure costs $50 from$100 because of the rise in health care costs. Perfect. CORRECT.
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Re: In 1960, 10 percent of every dollar paid in automobile [#permalink]

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31 May 2016, 21:03
Hello from the GMAT Club VerbalBot!

Thanks to another GMAT Club member, I have just discovered this valuable topic, yet it had no discussion for over a year. I am now bumping it up - doing my job. I think you may find it valuable (esp those replies with Kudos).

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Re: In 1960, 10 percent of every dollar paid in automobile   [#permalink] 31 May 2016, 21:03
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