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Insect infestations in certain cotton-growing regions of the world have caused dramatic increases in the price of cotton on the world market. By contrast, the price of soybeans has long remained stable. Knowing that cotton plants mature quickly, many soybean growers in Ortovia plan to cease growing soybeans and begin raising cotton instead, thereby taking advantage of the high price of cotton to increase their income significantly, at least over the next several years.
Which of the following, if true, most seriously weakens the plan’s chances for success?
Insect infection causes price rise in cotton..
(A) The cost of raising soybeans has increased significantly over the past several years and is expected to continue to climb. - wrong , still they can increase their income
(B) Tests of a newly developed, inexpensive pesticide have shown it to be both environmentally safe and effective against the insects that have infested cotton crops. -- correct .in newly developed pesticides can effective against insect .there will no price rise in Cotton price ..hence plan will fail
(C) In the past several years, there has been no sharp increase in the demand for cotton and for goods made out of cotton. - wrong .. it can still increase (D) Few consumers would be willing to pay significantly higher prices for cotton goods than they are now paying. wrong
(E) The species of insect that has infested cotton plants has never been known to attack soybean plants.
(B) is the best winner: a cure of the disease will return cotton to its previous lower price and the intended plan of reaping huge profits (as a result of increase in price) in the long run will fail.
(D) that a few customers are unwilling to absorb the extra cost (at a prohibitive rate) does not defeat the fact that its current price (dramatically increased) will result to a loss. _________________
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The problem here is not the demand, but the supply. Less supply, prices go up. The problem in C is that it doesn't consider the supply, only the demand. The demand didn't increase, but the supply fell sharply! So even with the demand on the same level, if the supply doesn't return to previous levels, the price will be good for some time. B weakens the problem with the supply.
farmers are going for cotton to make more profit because cotton in some areas is affected by insects. But if insects can be killed and will affect cotton supply then, farmers cant make more profit. _________________
Check out this awesome article about Anderson on Poets Quants, http://poetsandquants.com/2015/01/02/uclas-anderson-school-morphs-into-a-friendly-tech-hub/ . Anderson is a great place! Sorry for the lack of updates recently. I...