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# In 1960, 10 percent of every dollar paid in automobile

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Intern
Joined: 26 Aug 2005
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In 1960, 10 percent of every dollar paid in automobile  [#permalink]

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20 Jan 2008, 08:23
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35% (medium)

Question Stats:

70% (01:21) correct 30% (01:23) wrong based on 446 sessions

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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?
Director
Joined: 25 Dec 2007
Posts: 523
Schools: Harvard '11

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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.
Manager
Joined: 02 Jan 2008
Posts: 152

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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.
Director
Joined: 09 Aug 2006
Posts: 505

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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...
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Director
Joined: 30 Jun 2007
Posts: 719

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20 Jan 2008, 12:21
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(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)

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In 1960, 10 percent of every dollar paid in automobile  [#permalink]

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23 Feb 2009, 07:55
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.
Intern
Joined: 15 Dec 2008
Posts: 28
Re: In 1960, 10 percent of every dollar paid in automobile  [#permalink]

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23 Feb 2009, 08:44
I would go with E because that seems to be the only possible answer here...
VP
Joined: 05 Jul 2008
Posts: 1297
Re: In 1960, 10 percent of every dollar paid in automobile  [#permalink]

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23 Feb 2009, 08:46
1
Got an E as well, C is a trap as it talks about repair costs and not costs incurred because of injury
VP
Joined: 18 May 2008
Posts: 1131
Re: In 1960, 10 percent of every dollar paid in automobile  [#permalink]

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23 Feb 2009, 10:24
Hmmmm Gud question.
The main point in this question is that we have to pay attention to the costs arising from injuries ocurred in car accidents. C may look tempting at first but we r not bothered abt costs arising out of car repairs. Among all choices , E is the best.

ConkergMat 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.
Director
Joined: 25 Oct 2006
Posts: 563
Re: In 1960, 10 percent of every dollar paid in automobile  [#permalink]

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23 Feb 2009, 11:55
Costs increase toward automobile injuries ----> Health cost increased.

IMO E
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Re: In 1960, 10 percent of every dollar paid in automobile  [#permalink]

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24 Feb 2009, 23:07
icandy wrote:
Got an E as well, C is a trap as it talks about repair costs and not costs incurred because of injury

Yes, C is indeed a trap. Agree with E.
Intern
Joined: 01 Dec 2008
Posts: 40
Re: In 1960, 10 percent of every dollar paid in automobile  [#permalink]

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25 Feb 2009, 02:23

The automobile insurance is used to cover the medical bills from injuries that are casued due to accidents, and E is the only option tat explains the stimulus
Manager
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Re: In 1960, 10 percent of every dollar paid in automobile  [#permalink]

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06 Feb 2013, 06:19
Can anyone explain what is wrong with D?
Intern
Joined: 15 Aug 2012
Posts: 44
Re: In 1960, 10 percent of every dollar paid in automobile  [#permalink]

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06 Feb 2013, 13:15
roopika2990 wrote:
Can anyone explain what is wrong with D?

The premise mentioned in the question is that in 1960, 10% of every dollar paid (.1 cents per dollar) is paid towards injuries occurring from accidents, the same cost rose to 50% of every dollar paid (.5 cents per dollar).

the question stem asks us to resolve this discrepancy that what could be the possible reason for the increase from 0.1 to 0.5 per dollar even though the cars were safer.

Option D talks about increase in Insurance price and nothing about the cost of injuries, so this option is not in scope of passage.
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Concentration: Finance
Re: In 1960, 10 percent of every dollar paid in automobile  [#permalink]

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14 Oct 2013, 07:59
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?

The key word here is INJURIES. Car's are not injured, they are damaged.
So it has to be talking about Health-care costs.
That is why E over C

Hope it helps
J
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GMAT 1: 660 Q48 V33
Re: In 1960, 10 percent of every dollar paid in automobile  [#permalink]

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17 Oct 2013, 22:40
1
(A) There were fewer accidents in 1990 than in 1960. ---Incorrect, this is opposite to what we need. More money in less accidents does not solve the discrepancy.
(B) On average, people drove more slowly in 1990 than in 1960. ---- Completely irrelevant.
(C) Cars grew increasingly more expensive to repair over the period in question. --- Incorrect, we are not concerned about price of the car repair. Not related to accidents and injuries.
(D) The price of insurance increased more rapidly than the rate of inflation between 1960 and 1990. ---- Again it does not explain why more money went into injuries from accidents even though the cars were safer.
(E) Health-care costs rose sharply between 1960 and 1990. --- Finally got what we want. An increase in health care suggests that if in 1960 \$10 from \$100 went into injuries from accidents. Now the same injuries to cure costs \$50 from \$100 because of the rise in health care costs. Perfect. CORRECT.
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Re: In 1960, 10 percent of every dollar paid in automobile  [#permalink]

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29 Apr 2017, 23:04
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.
Earlier 10% was paid for cost arising due to injuries in car accident but in 1990 it was 50% even though car were more safer in 1990.

Which of the following, if true, best explains the discrepancy outlined above?
(A) There were fewer accidents in 1990 than in 1960. what about cost ?
(B) On average, people drove more slowly in 1990 than in 1960. no relation with cost .
(C) Cars grew increasingly more expensive to repair over the period in question. but we are talking about injuries
(D) The price of insurance increased more rapidly than the rate of inflation between 1960 and 1990. we are talking about pay out
(E) Health-care costs rose sharply between 1960 and 1990. ok that might be the reason why payout for injuries are more now.
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Re: In 1960, 10 percent of every dollar paid in automobile  [#permalink]

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11 Oct 2017, 10:32
E it is. If the price of health care has increased over time,then it is natural to spend more portion of the premium on treatment. Crystal clear
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Re: In 1960, 10 percent of every dollar paid in automobile &nbs [#permalink] 11 Oct 2017, 10:32
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