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The cotton farms of Country Q became so productive that the market cou

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Re: The cotton farms of Country Q became so productive that the market cou  [#permalink]

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New post 17 Jul 2010, 02:32
A makes clear why govt tried 2 boost prices.
there4 A it is
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New post 29 Apr 2011, 08:01
yes A is in fact strong . but only under constraints. D is weaker and less clear than A
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New post 08 Jun 2011, 21:06
The cotton farms of Country Q became so productive that the market could not absorb all that they
produced. Consequently, cotton prices fell. The government tried to boost cotton prices by offering farmers who
took 25 percent of their cotton acreage out of production direct support payments up to a specified maximum per
farm.
The 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) Depressed cotton prices meant operating losses for cotton farms, and the government lost revenue from
taxes on farm profits.
(B) Cotton production in several counties other than Q declined slightly the year that the support-payment
program went into effect in Q.
(C) The first year that the support-payment program was in effect, cotton acreage in Q was 5% below its level
in the base year for the program.
(D) The specified maximum per farm meant that for very large cotton farms the support payments were less
per acre for those acres that were withdrawn from production than they were for smaller farms.
(E) Farmers who wished to qualify for support payments could not use the cotton acreage that was withdrawn
from production to grow any other crop.
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Re: The cotton farms of Country Q became so productive that the market cou  [#permalink]

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New post 09 Jun 2011, 23:09
ruturaj wrote:
Please explain more


You did not understand which part?
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Re: The cotton farms of Country Q became so productive that the market cou  [#permalink]

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New post 04 Jul 2011, 08:58
Good question !! will go with a as well
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New post 26 Dec 2011, 02:23
Even I was pretty baffled by this one from the OG. Very confusing. Is it that we have to assume the contrapositive of option A to get the paradox resolved? I mean A just says that lower cotton prices indicate operating losses for cotton farmers and that the government loses revenue because of lower cotton prices.
Thus, do we have to assume that the price of cotton will inevitably increase after the government introduces the "direct support payments" program? Only then can we say that the governmental revenues will start increasing as cotton prices start increasing.
I felt it is a far leap.
I am not at all doubting the OA and OG. I am just trying to understand the logic to get the solution to this problem. Any help would be appreciated. TIA.
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New post 26 Dec 2011, 11:12
A
So government will pay money to farmer to stop producing cotton and still will make money from cotton farmer .
So we need to find how
A sounds like a plan
B out of context
C same how will government make money
Same with D and E no reason is given on how will government make up for the loss in revenue
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Re: The cotton farms of Country Q became so productive that the market cou  [#permalink]

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New post 16 Jan 2012, 10:11
+1 for A.

Some of the words in the argument confused me. But the word 'budget' in question seems to link to the option A only. So, my vote for A!
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New post 06 Jul 2012, 08:50
+1 A.

The government hopes to nullify revenue losses with this buy-back Plan.

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New post 12 Sep 2012, 03:06
This one took close to 2 mins for me. I chose A though.

For the government's move to not be a burden the relief value offered to the farmers should be less than the total profit lost due to falling prices of cotton. Statement A seems the closest to this reasoning, hence chose A.

Good question.
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Re: The cotton farms of Country Q became so productive that the market cou  [#permalink]

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New post 14 Mar 2013, 23:05
E is the best option here.
If the farmers can use the cotton acreage for any other crop, it is certain that they would use this land for production cotton with the money incentive rather than keeping the land w/o any crops.
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New post 14 Mar 2013, 23:55
Option A is saying that the government lost revenue from taxes on farm profit. I know it doesn't make sense but if the govt is losing profit then how is A the correct answer? Can someone help me out? I think i'm not able to understand this option.
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Re: The cotton farms of Country Q became so productive that the market cou  [#permalink]

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New post 15 Mar 2013, 05:09
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mahendru1992 wrote:
Option A is saying that the government lost revenue from taxes on farm profit. I know it doesn't make sense but if the govt is losing profit then how is A the correct answer? Can someone help me out? I think i'm not able to understand this option.


Hi mahendru1992,

To solve the paradox, We need to show that even if the government paid some farmers in order to boost cotton prices, it's wouldn't affect the government's budget i.e there will be NO LOSS

A states that : Depressed cotton prices meant operating losses for cotton farms, and the government lost revenue from taxes on farm profits.

So, the fact that depressed cotton prices meant operating losses for cotton farms can be perceived as a shortfall, Therefore, if the government paid some farmers, it will not loose revenue from taxes on farm profits thereby not affecting the budget.

Hope that helps !
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New post 15 Mar 2013, 11:10
Rock750 wrote:
mahendru1992 wrote:
Option A is saying that the government lost revenue from taxes on farm profit. I know it doesn't make sense but if the govt is losing profit then how is A the correct answer? Can someone help me out? I think i'm not able to understand this option.


Hi mahendru1992,

To solve the paradox, We need to show that even if the government paid some farmers in order to boost cotton prices, it's wouldn't affect the government's budget i.e there will be NO LOSS

A states that : Depressed cotton prices meant operating losses for cotton farms, and the government lost revenue from taxes on farm profits.

So, the fact that depressed cotton prices meant operating losses for cotton farms can be perceived as a shortfall, Therefore, if the government paid some farmers, it will not loose revenue from taxes on farm profits thereby not affecting the budget.

Hope that helps !


Great explanation!

I initially thought D is the official answer, but now looking at the explanation how Govt. has smartly balanced out the budget, it is clearly A that is the winner!
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New post 06 Jul 2013, 23:03
Question confused me for the longest time and after reading so many posts it didn't click for me until now.

What's confusing is that the gov't lost revenue from taxes on farm profits (answer choice A). I didn't see how losing revenue would help the net burden on the budget, but I realize this stmt in turn, will mean that when cotton prices increases, the gov't will receive more revenue from taxes on farm profits. I'm not negating the argument (which is the case for assumption questions), as this question is a "resolve the paradox" type of question, but instead if answer choice is true, that means when cotton price increases, so will gov't revenue.
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Re: The cotton farms of Country Q became so productive that the market cou  [#permalink]

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New post 07 Jul 2013, 00:00
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ellenhch wrote:
Question confused me for the longest time and after reading so many posts it didn't click for me until now.

What's confusing is that the gov't lost revenue from taxes on farm profits (answer choice A). I didn't see how losing revenue would help the net burden on the budget, but I realize this stmt in turn, will mean that when cotton prices increases, the gov't will receive more revenue from taxes on farm profits. I'm not negating the argument (which is the case for assumption questions), as this question is a "resolve the paradox" type of question, but instead if answer choice is true, that means when cotton price increases, so will gov't revenue.


Hi ellenhch.

First of all, this is strengthen question, not resolve the paradox. The main conclusion is: "If the government’s program is successful, it will not be a net burden on the budget"
What is the government's program? <== This is the payment plan to support the farmers.

So I will "rewrite" the conclusion as following:
Main conclusion: The successful payment plan of government will not be a net burden of the budget.
Question: Which of the following answer will best support this conclusion?

Okay, so you need to find an option that strengthen the point "a successful expense will not be a burden of the Gov's budget". The logic for this kind of question is:
Gov's NET INCOME = Gov's REVENUE - Gov'S EXPENSES

So you will think, "okay, Gov's net income will not decrease if":
(1) No expenses
--OR--
(2) Revenue comes from the expense will be larger then the expense itself.


A says: Depressed cotton prices ==> losses for cotton farms ==> the government lost revenue from taxes on farm profits.

It says that if Gov does not pay "the Expense - Payment plan" ==> Gov will loss revenue for sure because of falling prices of cotton. So it would be better if Gov pay like 1 dollar first (payment plan), then Gov can earn 2 dollars (revenue from taxes) later. It's exact the logic in A.

Hope it clears.
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Re: The cotton farms of Country Q became so productive that the market cou  [#permalink]

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New post 12 Jul 2013, 04:49
A should be answer as it supports the government decision.
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Re: The cotton farms of Country Q became so productive that the market cou  [#permalink]

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New post 25 Jul 2013, 10:11
gixxer1000 wrote:
This is a paradox question. How will the government provide payments to farmers to reduce their cotton production without reducing their budget. We have to figure out a way that the government can give money to the farmers and then make that money back so there is a net zero effect on the budget.

(A) Doesn't solve the paradox and actually widens it. The government loses money when it gives it to the farmers and then loses money again from the lost tax revenu.

(B) Irrelevant because it addresses production in countries other and country Q.

(C) Correct. This proves that the program works. If The program does reduce production then cotton prices will rise and the government will make up the difference from the payments through increased tax revenues from higher cotton prices.

(D) Irrelelevant. Size of farm makes no difference.

(E) Widens paradox like A because if the land is not used for anything else that results in reduced revenue and therefore reduced taxes for the government.



I still cant understand that it is a paradox question?
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Re: The cotton farms of Country Q became so productive that the market cou  [#permalink]

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New post 25 Jul 2013, 10:13
Is it a paradox question for sure? Then why is it put in strengthen the argument category?
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Re: The cotton farms of Country Q became so productive that the market cou  [#permalink]

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New post 25 Jul 2013, 10:37
Found this problem in the Verbal Review 2nd Edition GMAT book from the OG guide. It says this problem is, "Evaluation of a Plan". Per Manhattan GMAT's OG Archer, they labeled this problem as an , "Explain the Discrepancy".

Finally understand this after reading the explanation.
A) Depressed cotton prices meant operating losses for cotton farms, and the government lost revenue from taxes on farm profits.

The gov't therefore pays the direct support payments (now) in order to boost cotton prices.

When cotton prices increase, the gov't does not have to pay these direct support payments (as cotton P have increased and taking out acreage from the cotton farm is no longer necessary), therefore because the farms are earning more revenue from the increases prices of the cotton, gov't gets more revenue in taxes.

In the end, this does not result in a net burden on the budget.

Profit = Revenue - expenses (revenue the gov't gets later when cotton P increase), - expenses (the gov't paying direct support payments to farms now for the depressed cotton prices). Basically they offset each other.
Re: The cotton farms of Country Q became so productive that the market cou &nbs [#permalink] 25 Jul 2013, 10:37

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