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In 1960, 10 percent of every dollar paid in automobile [#permalink]
 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?
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Re: CR: automobile insurance [#permalink]
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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Re: CR: automobile insurance [#permalink]
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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Re: CR: automobile insurance [#permalink]
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...
_________________
-Unstoppable force moves immovable objects...-
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Re: CR: automobile insurance [#permalink]
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)
Answer: E
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Re: CR: automobile insurance
[#permalink]
20 Jan 2008, 12:21
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