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# lets say the time limit for this is 60 sec Canadian wheat

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Director
Joined: 21 Dec 2010
Posts: 621

Kudos [?]: 284 [0], given: 51

lets say the time limit for this is 60 sec Canadian wheat [#permalink]

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15 May 2011, 08:49
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35% (medium)

Question Stats:

66% (01:34) correct 34% (01:54) wrong based on 298 sessions

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lets say the time limit for this is 60 sec

Canadian wheat farmers produced so much wheat over the last season that wheat prices plummeted. The government tried to boost wheat prices by offering farmers who agreed not to harvest 20 percent of their wheat field compensation up to a specified maximum per farm.

The Canadian government's program, if successful, will not be a net burden on the budget. Which of the following, if true, is the best basis for an explanation of how this could be so?

(A) If prices were allowed to remain low, the farms would be operating at a loss, causing the government to lose tax revenue on farm profits.

(B) Wheat production in several countries declined the year that the compensation program went into effect in Canada.

(C) The first year that the compensation program was in effect, wheat acreage in Canada was 5% below its level in the base year for the program.

(D) The specified maximum per farm meant that for very large wheat farms the compensation was less per acre for those acres than they were for smaller farms.

(E) Farmers who wished to qualify for compensation program could not use the land not harvested for wheat to grow another crop.
[Reveal] Spoiler: OA

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Kudos [?]: 284 [0], given: 51

Board of Directors
Joined: 17 Jul 2014
Posts: 2680

Kudos [?]: 437 [1], given: 200

Location: United States (IL)
Concentration: Finance, Economics
GMAT 1: 650 Q49 V30
GPA: 3.92
WE: General Management (Transportation)
lets say the time limit for this is 60 sec Canadian wheat [#permalink]

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27 Nov 2015, 17:04
1
KUDOS
this is a paradox type question.

the correct answer should provide new information, so that when to have it in our "magic formula", the paradox would be explained.
first of all, there are 3 types of correct answer that would help solve the paradox => showing that the ineffective implementation of the plan; => alternate explanation; => or improper comparison.

Now, the government would pay \$, yet the plan would not cause any losses.
clearly, the answer choice should present an alternate explanation why it is so!

now, let's get back to the magic formula:

Because (answer choice), the government would not have \$\$ loss, although it would give \$\$ to farmers.

A If prices were allowed to remain low, the farms would be operating at a loss, causing the government to lose tax revenue on farm profits.
clearly, the assumption here must be that the \$\$ given would not be > than the \$\$ received from taxes.

B Wheat production in several countries declined the year that the compensation program went into effect in Canada.
does not help to solve the paradox.

C The first year that the compensation program was in effect, wheat acreage in Canada was 5% below its level in the base year for the program.
still doesn't help to solve the issue.

D The specified maximum per farm meant that for very large wheat farms the compensation was less per acre for those acres than they were for smaller farms.
while it might be true, this answer choice does not help us to explain why would the gvt not lose \$\$ even though they would offer \$ to farmers.

E Farmers who wished to qualify for compensation program could not use the land not harvested for wheat to grow another crop.
irrelevant and does not explain the paradox.

A thus is the best.

Kudos [?]: 437 [1], given: 200

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Kudos [?]: 286 [0], given: 10

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15 May 2011, 11:28
well !! went much above the time limit though.

between A and C, more production will actually help boost the prices.

A is clean and provides solid reason,here.
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Kudos [?]: 286 [0], given: 10

Manager
Joined: 11 Nov 2011
Posts: 74

Kudos [?]: 11 [0], given: 96

Location: United States
Concentration: Finance, Human Resources
GPA: 3.33
WE: Consulting (Non-Profit and Government)
Re: lets say the time limit for this is 60 sec Canadian wheat [#permalink]

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04 Jan 2015, 18:10
I do not get this question. If the government loses tax revenue from farm profits and yet has to compensate farmers who agreed not to harvest, should the government be running a budget deficit?

Kudos [?]: 11 [0], given: 96

Re: lets say the time limit for this is 60 sec Canadian wheat   [#permalink] 04 Jan 2015, 18:10
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