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The futures market lets investors speculate on future [#permalink]
09 Jul 2012, 09:35
90% (02:59) correct
10% (01:54) wrong based on 54 sessions
The futures market lets investors speculate on future products before they are produced. If a poor pork bellies supply is expected later, pork bellies’ futures prices rise; if a bountiful pork bellies supply is expected, pork bellies futures prices fall. This morning, swineologists predicted an oncoming influx of much-needed slop in the pigpen regions starting tomorrow. Thus, since sufficient slop is essential for the survival of a strong current supply of fuller pork bellies, prices of pork bellies futures will decline dramatically today.
Which of the following, if true, most weakens the argument to the left?
Choices A Pigs that do not consume adequate slop during the critical growth stage will not produce a full, rich product. B This fiscal year, pork bellies futures prices have varied more erratically compared to last year. C The slop that swineologists predict for tomorrow is only expected to be distributed well outside the pigpen areas. D Today, a press release by pork experts said that the foot-in-mouth disease decimating some of the pork bellies supply will spread widely before the start of the slaughtering season. E Investors who speculate in pork bellies futures rarely take physical possession of the pork bellies they trade.
I disagree with most of you. I am pretty sure the correct answer choice is D.
Simply apply the the supply and demand theory and use the information given in the argument.
poor pork bellies supply is expected later --pork bellies’ futures prices rise; if a bountiful pork bellies supply is expected -- pork bellies futures prices fall
Identify the conclusion of the argument: "prices of pork bellies futures will decline dramatically today."
D speculates little prospect (diseased infection) for supplies, so no way to expect any low prices of pork bellies. If the disease spreads "widely" and more pork bellies die before the start of the slaughtering season then the supply for this year's harvest will go down.
A. INCORRECT. This strengthens the argument. B. INCORRECT. This answer is not relevant to the conclusion. C. INCORRECT. This answer would appear to imply that the slop will not be distributed to the pork bellies. There is not enough information for us to make this jump. D. CORRECT. (explanation above). E. INCORRECT. This answer is not relevant to the argument.
Arg: price relies on the scarcity of goods: more goods produced --> price decreased; less goods produced --> price increased. And, prediction says that the amount of goods produced will increase (due to something that is essential for the survival of goods is much-needed). Arg concludes that price of goods will decrease.
D counters that by saying that, no, another announcement by experts says that there is a disease that will spread on the living goods. It means there are high chances that not a lot of goods will be produced (due to the disease killing them). Therefore it can be hypothesized that price would probably increase because the goods will be scarce. D weakens the conclusion that price of goods will decrease by saying it will increase.
I think the answer is E. Its because I think the outbreak only affects short term supply, but futures is trading on long term supply. Overall, I think it might still have an effect on the futures, but should be minimal.
I thought it was between C and E, but I opt for E now!
Choice D, in contrast, strengthens the argument because the disease makes the farmers who raise pigs will sell them soon, making the decline in the price of pork bellies.
Choice E shows only about the roles of characters in the argument, irrelevant to the price as well as the market of pork bellies.
Choice C instead shows that the slop does NOT affect the pigpen anyway, not affecting negatively to the pig, not make decline in the price of pork bellies. Therefore, choice C is the best choice. _________________
Why would you want to pick E at all? What has physical possession of pork supplies got to do with futures prices of pork, per the premises?
Close run between C and D; both answers have their strengths.
C is pertinent to the given premises, and weakens the conclusion since adequate supply of slop will not reach the pigpen regions.
D relies on outside information to weaken the argument that prices will decline. D might be a slightly better answer since it reinforces the idea that prices will not decline TODAY due to the F&M disease reports.
more slop--->a strong current supply of fuller pork bellies--->prices of pork bellies futures will decline to weaken this, we need to show that there will not be any decline even if the supply of slop is more (C) suits the reasoning. _________________
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