For several years, per capita expenditure on prescription drugs in Vor

A. After price increases were prohibited, drug manufacturers concentrated on producing new medications to replace existing products - this has no effect on per capita expenditure

B. The population of Voronia rose steadily throughout the period - this would decrease per capita expenditure

C. Improvements in manufacturing processes enable drug manufacturers to maintain high profit levels on drugs despite the price freeze. - nothing to do with increase in per capita expenditure

D. In addition to imposing a price freeze, the government encouraged doctors to prescribe generic versions of common drugs instead of the more expensive brand-name versions
- people would have started to buy less expensive generic medicine and per capita expenditure would have gone done, therfore government's action would have worked. BUt the q is why government's action didn't work.

E. After price increases were prohibited, some foreign manufacturers of expensive drugs ceased marketing them in Voronia. - as the usage of prescription drug didn't change, people would have started to buy these drugs outside voronia and pay additional shipping costs eventually rising the per capita expenditure. So the governmet's action didn't work.


Whats OA ?

getMBA already gave nice explanation for A.

Total drugss sold same.
per capita increased ==> cost of drugs increased
price of old drugs, drugs already existed in the market, not increased

How is that possible? New drugs have the higher prices than older ones reulting in per-capita expense on drugs to increase.

sly:)... they found the loophole.

Law says: you can't increase the price.

Businessman: ok. I will manufacture a new product (with slight changes) and put it in the market and charge a high price to begin with - then the price ceiling can't stop me from charging the price I want.

+1.

This is a relatively easy question, mainly due to the other answer choices sort of "suck" for lack of a better word.

We are desperately searching for why? Why is per capita spending still increasing? Whyyyyy?

A. New product doesn't mean price increase. An increase inherently means something exists, then increases. A new product can be set at any price. So, hypothetically, we could have the same number of people, now purchasing new and more expensive products. Hence, per capita spending is still increasing. These basta*** are getting rid of the old products and then creating replacements that are more expensive. Ding Ding Ding - sounds pretty logical, boys and girls...but let's move on.

B. B states population rose, but the stimulus mentions that usage didn't increase. So, who cares and I am still confused.

C. Whoop de doo for these businesses. We are trying to find out why per capita expenditure on these drugs are increasing, even though the usage isn't increasing, nor is the price of the current drugs. But, I will entertain this bull****. Let's assume the costs of the businesses went down from these new manufacturing processes. Terrific. So, these businesses' profits increase! Yay, P = R - C. Yay MBA stuff. So, presumably, we have lower costs, higher profits, but same price. So, uhhhh, why did the spending per capita increase? And why do I care about businesses' profits? I don't. C = irrelevant - leave me alone.

D. This furthers the confusion. So, usage doesn't go up - per the stimulus. And apparently, drugs are now cheaper. However, per capita spending is still increasing. WHAT IS THIS MADNESS?!?!

E. Well isn't this terrific. This answer choice causes me to waste 10 seconds of my test-taking life. Stimulus states: usage doesn't increase. Stimulus also states prices of current drugs do not increase. This answer choice is weak on several levels. What if these foreign manufacturers of drugs NEVER actually sold any of their drugs? Meaning, if they stopped marketing, who gives a sh**? Their products were never purchased in the first place, in other words, their products never had ANY affect on per capita spending! Laugh at this answer choice, roll your eyes, select A and mock the GMAT gods for trying to fool you.

Not. This. Time.

This is a great example of active vs. passive reading. Whenever you read a stimulus, try and attack its holes - rather than read, and hope an answer choice will make sense. I rarely read the question stem prior to the stimulus, yet again, I was an LSATter. It is a waste of time to read something twice . I feel if you attack CR with an active mind, you will perform beautifully. And, have fun with it!

HTH

Per capita expenditure = (Price x Volume)/ Population

So, for per capita expenditure to rise, any of 3 things have to happen
1) Price increases,
2) Volume increases,
3) Population decreases

Now, let's look at the choices

A) Will come back to this last.

B) Population increased. My formula tells me population can't increase. NOT B

C) High profit levels. Who gives a ****. NOT C

D) Generic drugs. Which means lower prices. My formula tells me prices need to increase. NOT D

E) No more marketing. Who gives a ****. NOT E.

A) That leaves us with A. Simple elimination. Now it could be possible that the new medications were more expensive. Higher prices. Satisfies my formula. Or the medications were not more expensive, but you don't know for sure. So, A is the "best" answer because all other choices are clearly wrong

Is this a Weaken or resolve the paradox question?

It seems to me that it is a resolve since we have two contradicting sets of facts. But what makes this a possibility for a weaken question is that it has a conclusion.

Any help to explain what question type this is?

It is a 'resolve the paradox' question. There is a paradox here:
There is price freeze and more medicine is not being sold. Still, per capita expenditure is increasing.
You have to explain the paradox.

Assume, there were 100 different types of medicines available in the market on which govt. froze the prices(that a particular drug will cost $X, and no chemist or druggist can charge more than the fixed price on the drug).It is also mentioned that the consumption of drugs stayed constant.Then how can the per capita expenditure for prescription drugs continued to increase by a substantial percentage each year?

May possible that the drug manufacturers started making more variety of drugs.(The listed drugs were 100 now 150; 50 new varieties are in market , and govt is unaware of those 5o drugs but the chemists are charging more and more for those new medicines.)hence per capita expenditure for prescription drugs continued to increase by a substantial percentage each year.

A. After price increases were prohibited, drug manufacturers concentrated on producing new medications to replace existing products ----- This is one way commercial corporations can survive and keep their profits steady. Since new drugs do not suffer price control. Drug manufactures make merry and hay while the sun shines. That is the reason govt. controls most of the times bite the dust


B. The population of Voronia rose steadily throughout the period. ---- Per capita takes into account of the fluctuations and then evens out.

C. Improvements in manufacturing processes enable drug manufacturers to maintain high profit levels on drugs despite the price freeze. ----improvements are not part of the agenda in this topic. We naturally believe that all the possible improvements are already in place. No company will keep improvements at bay, waiting for the price controls to arrive. Using generic versions, should bring down the cost and help reduce per capita prescription drugs figure.

D. In addition to imposing a price freeze, the government encouraged doctors to prescribe generic versions of common drugs instead of the more expensive brand-name versions – The discussion is about expenditure of branded prescription products This is also antithetical, since any use of generic versions, should then help bring down the per capita figure rather than raise

E. After price increases were prohibited, some foreign manufacturers of expensive drugs ceased marketing them in Voronia. availability of expensive or inexpensive drugs do not decide the per capita figure. It is the usage. Hence not relevant.

For several years, per capita expenditure on prescription drugs in Voronia rose by fifteen percent or more annually. In order to curb these dramatic increases, the ministry of health prohibited drug manufacturers from raising any of their products’ prices. Even though use of prescription drugs did not expand after this price freeze, per capita expenditure for prescription drugs continued to increase by a substantial percentage each year.
Which of the following, if true, most helps to explain why the ministry’s action did not achieve its goal?

A. After price increases were prohibited, drug manufacturers concentrated on producing new medications to replace existing products
Any of the existing products cannot have increased price. But if there were more new products introduce, then perhaps these contributed to the increase in per capita presc. drug prescription. Sneak manufacturers! CORRECT!

B. The population of Voronia rose steadily throughout the period.
Since it is about the per capita, then the total population doesn't matter. And say this increase are non-prescription users, then that would not explain the increase in per capita...

C. Improvements in manufacturing processes enable drug manufacturers to maintain high profit levels on drugs despite the price freeze.
Profits are irrelevant.

D. In addition to imposing a price freeze, the government encouraged doctors to prescribe generic versions of common drugs instead of the more expensive brand-name versions
This should decrease rather than increase...

E. After price increases were prohibited, some foreign manufacturers of expensive drugs ceased marketing them in Voronia.
This should decrease rather than increase

Answer: A

But how is it implied that new drugs will be costlier as compared to the old one?
Please explain.
Thanks

You are given:

"Even though use of prescription drugs did not expand after this price freeze, per capita expenditure for prescription drugs continued to increase by a substantial percentage each year"

The use of drugs remained the same, price did not increase so how come per capita expenditure continued to increase? If people are still using 10 tabs a month and the price of the 10 tabs is still the same, why are they paying more? Because the 10 tabs they are consuming now are different from the previous 10 tabs and are more expensive than the previous ones. The manufacturers are replacing existing products with new medicines - the price of which they can keep according to what suits them. They are pricing them higher and that is how the expense of medicines is increasing.

Can anyone explain why option A is correct?
Argument says
In order to curb these dramatic increases, the ministry of health prohibited drug manufacturers from raising any of their products’ prices
A says:
drug manufacturers concentrated on producing new medications to replace existing products
So the new medications should also be governed by the same rule.

Yes, but since these medications will be new, they can be priced at whatever price the company wants. There will be no reference price to stick to.

New medication does not have a reference price. The manufacturers are focusing on creating new medication to replace the old one. If the per capita expenditure is increasing, then obviously the new medication would be higher priced. The new medication is REPLACING the old one. So the patients taking the old medication will need to switch to new medication. Option (A) certainly fills in the gap very well.
Also, it is not an inference question. It is resolve the paradox. The correct option in this question type will give you new information that will help you resolve the two sides.

VeritasKarishma gmat1393 GMATNinja nightblade354

Isn't it right to think that a population increase could cause inflation? Wouldn't inflation further lead to more expenses? and wouldn't that lead to an increased per capita expenditure on products?


That is what I comprehended from option B, and I thought it was fairly straightforward!

No Arguments about A though.

Population increase may cause inflation or it may not. If the Govt tweaks monetary policies to ensure no inflation, then it is not necessary to see inflation. In either case, we know that the prices of drugs are frozen. Price increase is banned - inflation or no inflation in the rest of the economy. The pharma sector should not see any inflation. No matter how much the demand will rise, the Govt is not allowing the sector to raise prices.