Early in the twentieth century, Lake Konfa became very : GMAT Critical Reasoning (CR)
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# Early in the twentieth century, Lake Konfa became very

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Early in the twentieth century, Lake Konfa became very [#permalink]

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12 May 2007, 07:08
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Early in the twentieth century, Lake Konfa became very polluted. Recently fish populations have recovered as release of industrial pollutants has declined and the lake’s waters have become cleaner. Fears are now being voiced that the planned construction of an oil pipeline across the lake’s bottom might revive pollution and cause the fish population to decline again. However, a technology for preventing leaks is being installed. Therefore, provided this technology is effective, those fears are groundless. 28-09
The argument depends on assuming which of the following?

A: Apart from development related to the pipeline, there will be no new industrial development around the lake that will create renewed pollution in its waters.

B: Other than the possibility of a leak, there is no realistic pollution threat posed to the lake by the pipeline’s construction

C: There is no reason to believe that the leak-preventing technology would be ineffective when installed in the pipeline in Lake Konfa.

D: Damage to the lake’s fish populations would be the only harm that a leak of oil from the pipeline would cause.

E: The species of fish that are present in LakeKonfa now are the same as those that were in the lake before it was affected by pollution.

==> why is C wrong?

Construction contractors working on the cutting edge of technology nearly always work on a "cost-plus" basis only. One kind of cost-plus contract stipulates the contractor's profit as a fixed percentage of the contractor's costs; the other kind stipulates a fixed amount of profit over and above costs.Under the first kind of contract, higher costs yield higher profits for the contractor, so this is where one might expect final costs in excess of original cost estimates to be more common. Paradoxically, such cost overruns are actually more common if the contract is of the fixed-profit kind.

Which one of the following , if true, most helps to resolve the apparent paradox in the situation described above?

A) Clients are much less likely to agree to a fixed-profit type of cost plus contract when it is understood that under certain conditons the project will be scuttled than they are when there is no such understanding

B) On long-term contracts, cost projections take future inflation into account, but since the figures used are provided by the government,they are usually underestimates.

C) On any sizable construction project, the contractor bills the client monthly or quarterly, so any tendency for original cost estimates to be exceeded can be detected early.

D) Clients billed under a cost-plus contract are free to review individual billings in order to uncover wasteful expenditures, but they do so only when the contractor's profit varies with cost.

E) The practice of submitting deliberately exaggerated cost estimates is most common in the case of fixed-profit contracts because it makes the profit, as a percentage of estimated cost, appear modest.

==> very confusing for me
If you have any questions
New!
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12 May 2007, 08:13
1. B
Here the argument is, if effective leak proof technology is used, there will not be any environmental threat.

thus C is part of argument rather than an assumption.
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12 May 2007, 08:33
2.In simplified terms ,argument says that based on profit of contractors ,project can be classified in two ways

1) In which contractor take the percentage of total project cost.
2) A fixed profit is taken by the contractor irrespective of project cost.
Now logically in first type of contract, contractors will try to over budget as their profit will increase....
But this is not the case.....so I think only D tries to resolve the paradox.
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12 May 2007, 11:00
Agree with B and D
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12 May 2007, 11:37
Jamesk486 wrote:
Early in the twentieth century, Lake Konfa became very polluted. Recently fish populations have recovered as release of industrial pollutants has declined and the lake’s waters have become cleaner. Fears are now being voiced that the planned construction of an oil pipeline across the lake’s bottom might revive pollution and cause the fish population to decline again. However, a technology for preventing leaks is being installed. Therefore, provided this technology is effective, those fears are groundless. 28-09
The argument depends on assuming which of the following?

A: Apart from development related to the pipeline, there will be no new industrial development around the lake that will create renewed pollution in its waters.

B: Other than the possibility of a leak, there is no realistic pollution threat posed to the lake by the pipeline’s construction

C: There is no reason to believe that the leak-preventing technology would be ineffective when installed in the pipeline in Lake Konfa.

D: Damage to the lake’s fish populations would be the only harm that a leak of oil from the pipeline would cause.

E: The species of fish that are present in LakeKonfa now are the same as those that were in the lake before it was affected by pollution.

==> why is C wrong?

I am confused between B & D. Can any one explain...?

Construction contractors working on the cutting edge of technology nearly always work on a "cost-plus" basis only. One kind of cost-plus contract stipulates the contractor's profit as a fixed percentage of the contractor's costs; the other kind stipulates a fixed amount of profit over and above costs.Under the first kind of contract, higher costs yield higher profits for the contractor, so this is where one might expect final costs in excess of original cost estimates to be more common. Paradoxically, such cost overruns are actually more common if the contract is of the fixed-profit kind.

Which one of the following , if true, most helps to resolve the apparent paradox in the situation described above?

A) Clients are much less likely to agree to a fixed-profit type of cost plus contract when it is understood that under certain conditons the project will be scuttled than they are when there is no such understanding

B) On long-term contracts, cost projections take future inflation into account, but since the figures used are provided by the government,they are usually underestimates.

C) On any sizable construction project, the contractor bills the client monthly or quarterly, so any tendency for original cost estimates to be exceeded can be detected early.

D) Clients billed under a cost-plus contract are free to review individual billings in order to uncover wasteful expenditures, but they do so only when the contractor's profit varies with cost.

E) The practice of submitting deliberately exaggerated cost estimates is most common in the case of fixed-profit contracts because it makes the profit, as a percentage of estimated cost, appear modest.

I think E is the correct answere choice.

==> very confusing for me

Javed.

Cheers!
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12 May 2007, 15:56
B for the first one

I chose E initially but after seeing the explanation for D by apache it makes sense. Customers neglect any increase in costs since they look at it only if the costs relate to the profits of constructors. So cost grows unchecked and hence cost+profit ends up being higher than it would've been if the other option was chosen. So D.
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12 May 2007, 21:22
javed,
One of the criterions to measure the lake pollution level is the fish population....
Now argument says
Fears are now being voiced that the planned construction of an oil pipeline across the lake’s bottom might revive pollution and cause the fish population to decline again.

now D says only fish population will decrease due to spillage...but argument says this will revive overall pollution....may be affecting even plants.
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14 May 2007, 01:06
14 May 2007, 01:06
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