Transit privatization is highly controversial, with proponents claimin

Question

Project RC Butler 2020  -  Participate and win GMAT Club Tests.   
Passage # 09, Date: 05-Apr-2020
 This post is a part of Project RC Butler 2020 .  Click here for Details

Transit privatization is highly controversial, with proponents claiming great potential benefits and detractors pointing to cases where privatization has been very problematic. One critical consideration in this argument is the concept of merit good. The rationale behind this concept is that governments should guarantee basic service in public transportation to deprived customer groups despite the fact that it is economically irrational.

Today, the question among most observers is not whether public transportation should be subsidized, but what the optimal level of subsidy should be. All public transportation systems need some degree of subsidy to run, but some are more privatized than others. The U.S. air transportation system is an example where “privatization” has worked well: very little government subsidy goes to the airlines, but tickets are both inexpensive and readily available.

However, in markets where there is no economic incentive for airlines to fly, the government has instituted a program called Essential Air Service. Unlike airline privatization as a whole, this program, a holdover from the days of bloated airline regulation, has been a disastrous example of overspending and inefficiency. Across Alaska and many other rural states like Maine and North Dakota, airports and airlines are subsidized so that unprofitable routes are flown in the name of “merit good.” However, in most of these places, airports are neither required nor important to deprived customer groups; they are simply an economic boon to important special interest groups that support congressmen and senators.

While there is a place for subsidy and even direct government involvement beyond the required minimum – when true merit good issues are concerned – most transportation systems are better today after privatization than they were in the days of total government control.  All you need to do is look at the “Essential Air Service” program to understand the wastefulness and inefficiency that existed in the 60’s and 70’s when most public transportation systems were under full government control.     1 
 1. The author would most likely agree with government subsidies beyond the required minimum for which of the following companies:

A. a steel manufacturing plant that cannot remain profitable without infrastructure improvement and higher steel prices.
B. a bus company that services remote towns in which many deprived people live and that cannot be profitable without subsidies.
C. a train company that services many affluent summer communities and will stop service without appropriate subsidies.
D. a bio-medical company that will make an important vaccines for rare diseases but needs access to start-up money.
E. an airline that services the major U.S. markets but is failing to compete with its rivals, some of which operate in the Essential Air Service program.

2 
 2. All of the following can be properly inferred from the passage EXCEPT:

A. A majority of public transportation systems are better under privatization than they were under government control.
B. Some public transportation systems in the U.S. can be run without subsidies.
C. Most observers agree that there should be some degree of government subsidy in public transportation.
D. Most public transportation systems were under government control in the 60’s and 70’s.
E. Many Essential Air Service flights are on unprofitable routes in rural states.

3 
 3. The author’s highlighted statement at the end of the passage assumes which of the following:

A. The Essential Air Service program is not drastically different than the government airline programs in the 60’s and 70’s.
B. Government subsidy programs have not improved dramatically since the 60’s and 70’s.
C. Public transportation systems are not better today than they were in the 60’s and 70’s.
D. The Essential Air Service program is not going to change dramatically and remove some of the most inefficient routes.
E. The need for the Essential Air Service program has not increased dramatically over the past few years.

AnirudhaS · Accepted Answer

Answers are in  bold .

1. The author would most likely agree with government subsidies beyond the required minimum for which of the following companies:

A. a steel manufacturing plant that cannot remain profitable without infrastructure improvement and higher steel prices.
 B. a bus company that services remote towns in which many deprived people live and that cannot be profitable without subsidies. 
C. a train company that services many affluent summer communities and will stop service without appropriate subsidies.
D. a bio-medical company that will make an important vaccines for rare diseases but needs access to start-up money.
E. an airline that services the major U.S. markets but is failing to compete with its rivals, some of which operate in the Essential Air Service program.

Explanation of question 1: 
With these types of questions first we need to ascertain the author's tone. Is the author agreeing to the some sort of subsidy for the public transport. Yes he is. How much? Well he says at least some, but the degree might change on a case to case basis. Great, now we understand what the author's take on the this is. All we have to now do is go over the choices and match the option which matches our understanding. We can easily eliminate A, C and E. 
However, the choice between B and D is slightly tricky. 
B says exactly what is stated in the passage except now it is a bus company (instead of airline). Great, its serving the remote communities, but obviously not profitable. So must rely on govt subsidy. Lets keep this.
D says this bio-tech company, although would work on vaccines, and will help the community, it needs start-up money. So once it is up and running, probably it would be self sufficient - unlike the bus route which would need constant govt subsidies. D is out.
B is our answer.

2. All of the following can be properly inferred from the passage EXCEPT:

A. A majority of public transportation systems are better under privatization than they were under government control.
 B. Some public transportation systems in the U.S. can be run without subsidies. 
C. Most observers agree that there should be some degree of government subsidy in public transportation.
D. Most public transportation systems were under government control in the 60’s and 70’s.
E. Many Essential Air Service flights are on unprofitable routes in rural states.

Explanation of question 2: 
Now these type of questions we will use the POE technique. Lets start.
We can eliminate A, C D and E easily. 
In brief, A because author is an advocate of privatisation; 
C because it is stated in the passage " the  question  among most observers  is not whether public transportation should be subsidized "; 
D because it is stated in the passage " in the 60’s and 70’s when most public transportation systems were  under full government control ";
E because it is stated in the passage "in markets  where there is no economic incentive  for airlines to fly, the government has instituted a program called Essential Air Service";
Only B remains. Also B is wrong, the author says that you NEED some sort of subsidy. Hence B is our answer.

3. The author’s highlighted statement at the end of the passage assumes which of the following:

A. The Essential Air Service program is not drastically different than the government airline programs in the 60’s and 70’s. 
B. Government subsidy programs have not improved dramatically since the 60’s and 70’s.
C. Public transportation systems are not better today than they were in the 60’s and 70’s.
D. The Essential Air Service program is not going to change dramatically and remove some of the most inefficient routes.
E. The need for the Essential Air Service program has not increased dramatically over the past few years.

Explanation of question 3: 
A quick summary of what is written in the highlighted part - basically the author says in the 60's and 70's most public transport was under govt control and it wasted money. The current Essential Air Service (EAS) can be compared to it. 
Since Essential Air Service and 60's public transport can be compared with each other, it can be said that it is not drastically different. That is what A says. Lets keep this in.
B - well we do not know. In either case, this is not a comparison of EAS and 60's transport. Out.
C - this is not the intended meaning. Refer to the quick summary we just made.
D - probably it is not going to change, but again not what the highlighted part means.
E - this is completely irrelevant. Whether it has improved or not is not the intended meaning, the meaning is both are equally bad.

ArtVandaley · Answer

My take is B, B and A in that order.

2nd one is bit confusing as the choice E mentioned "many". If many means >50%, then there is no support in the passage for the same. However B is a black and white answer as second para states that all public transportation system needs some subsidy.

Posted from my mobile device

BlueBook · Answer

1) The author supports the concept of ‘merit good’ ‘ when true merit good issues are concerned’  for example to guarantee basic public services for deprived customer groups. The choice that best corresponds with this is choice B.

2) B is the answer.
A) This can be found in the last paragraph. ‘ …most transportation systems are better today…’.  Most can be inferred to mean a majority.  Incorrect. 
B) This statement is wrong. In the second paragraph, it is written that  ‘all public transportation systems need some level of subsidy to run…’  therefore saying that some public transportation systems can be run without subsidies is false.  Correct. 
C) This statement can be inferred from the 1st sentence of the 2nd paragraph  ‘Today,…. ’  Incorrect
D ) This statement can be inferred from the last sentence of the last paragraph i.e. the highlighted bit.  Incorrect 
E) This statement can be inferred from the 2nd paragraph  ‘Across Alaska and many other rural states…’   Incorrect

3) This is a typical assumption question as in CR. This statement is tied to the previous statement.
The previous statement is the conclusion. What is the conclusion? Transportation systems are better today than in the past when they were under total government control.
Why? ‘Essential Air Service’ program was highly wasteful and inefficient in the 60s and 70s when transportation systems were under total government control. Therefore, there is no reason to go back to public transportation systems that were under total government control. But what is government subsidy programs have improved?? Then this must be the assumption. The assumption is that government subsidy programs have not dramatically improved since the 60s and 70s. B is the answer

pabpinor · Answer

In this first question I fell for B before realising that the author does not really shares his opinion in the first paragraph, just states some definition that actually he does not fully support.

1. The author would most likely agree with government subsidies beyond the required minimum for which of the following companies:

A. a steel manufacturing plant that cannot remain profitable without infrastructure improvement and higher steel prices.  Wrong.   The author doesn't agree with subsidizing unprofitable private business, we do not have information about that. 
B. a bus company that services remote towns in which many deprived people live and that cannot be profitable without subsidies.  Wrong.   This does not fit the reason because there is no mention of the need of the service, also the business does not need to be profitable. The author does not agree with the merit good concept always. 
 C. a train company that services many affluent summer communities and will stop service without appropriate subsidies.   Right.   Because of the need of the service to operate and the affluent demand, the author would support more the need to subsidize this business than the previous one. 
D. a bio-medical company that will make an important vaccines for rare diseases but needs access to start-up money.  Wrong.   There was not talk about financing, we are not talking neither about no-public transportation business. Not related. 
E. an airline that services the major U.S. markets but is failing to compete with its rivals, some of which operate in the Essential Air Service program.  Wrong.   This is not a proper reason neither, does not provide information that allows us to compare the performance in detail, also some rivals may compete without EAS flights and anyway, the author does not think that the EAS program makes sense (is against it).

2. All of the following can be properly inferred from the passage EXCEPT:

A. A majority of public transportation systems are better under privatization than they were under government control.  Wrong.   This can be inferred from the first sentence of the last paragraph (it is explicitly said). 
 B. Some public transportation systems in the U.S. can be run without subsidies.   Right.   This is not mentioned by the author, moreover, it states that the question is not if transportation should be subsidized or not, but how much, so does not give any room to think that any transportation system can run without subsidies. 
C. Most observers agree that there should be some degree of government subsidy in public transportation.  Wrong.   This is exactly mentioned in the first sentence of the second paragraph, relates to the previous explanation and could be considered a right answer if there was not a clearer one. 
D. Most public transportation systems were under government control in the 60’s and 70’s.  Wrong.   This is said at the last sentence. 
E. Many Essential Air Service flights are on unprofitable routes in rural states.  Wrong.   In the second sentence of the third paragraph it is said that.

3. The author’s highlighted statement at the end of the passage assumes which of the following:

A. The Essential Air Service program is not drastically different than the government airline programs in the 60’s and 70’s.  Wrong.   This is a trap, the sentence kind of says that but not really, does not talk about government airline programs but transportation in general. 
 B. Government subsidy programs have not improved dramatically since the 60’s and 70’s.   Right.   The last sentence of the passage just compares the "wastefulness and inefficiency" of the EAS programs with the former ones so nothing has improved regarding subsidies. 
C. Public transportation systems are not better today than they were in the 60’s and 70’s.  Wrong.   That does not realates, the sentence talks about actual flight subsidies vs previous government controlled transportation, before in the passage it talks about nicely operated bus lines, etc. 
D. The Essential Air Service program is not going to change dramatically and remove some of the most inefficient routes.  Wrong.   This may be true but would come from the third paragraph, not the last sentence. 
E. The need for the Essential Air Service program has not increased dramatically over the past few years.  Wrong.   There is no information about the level of need or its changes. Could have or not have, anyway does not matter to understand the last sentence.

Regards,
Pablo

SiffyB · Answer

1. The author would most likely agree with government subsidies beyond the required minimum for which of the following companies:

A. a steel manufacturing plant that cannot remain profitable without infrastructure improvement and higher steel prices.
 The passage talks about public transportation. So a steel manufacturing plant is out of scope.
 
B. a bus company that services remote towns in which many deprived people live and that cannot be profitable without subsidies.
 If the government intervenes in this case, it is an example of merit good, since, the government will provide additional subsidies for the deprieved groups.
 
C. a train company that services many affluent summer communities and will stop service without appropriate subsidies.
 Notice the term 'affluent' which means wealthy. According to the passage, the government should not give subsidies beyond required minimum for this group.

D. a bio-medical company that will make an important vaccines for rare diseases but needs access to start-up money.
 Out of scope of the passage. This choice does not talk about public transportation.
 
E. an airline that services the major U.S. markets but is failing to compete with its rivals, some of which operate in the Essential Air Service program.
 Between B and E, B fits better in the merit good category.

Correct answer - (B)

2. All of the following can be properly inferred from the passage EXCEPT:

A. A majority of public transportation systems are better under privatization than they were under government control.
 This is stated in the passage. (refer paragraph 4, line 1).
 
B. Some public transportation systems in the U.S. can be run without subsidies.
 This is not stated in the passage. Thus, this is the correct answer.
 
C. Most observers agree that there should be some degree of government subsidy in public transportation.
 This can be inferred from Paragraph 2, line 1. "the question among most observers is not whether public transportation should be subsidized..".
 
D. Most public transportation systems were under government control in the 60’s and 70’s.
 Mentioned in last paragraph: "wastefulness and inefficiency that existed in the 60’s and 70’s when most public transportation systems were under full government control".
 
E. Many Essential Air Service flights are on unprofitable routes in rural states.
 Metioned in the third paragraph: "many other rural states like Maine and North Dakota, airports and airlines are subsidized so that unprofitable routes..".

Correct answer- (B)

3. The author’s highlighted statement at the end of the passage assumes which of the following:

A good way to determine the correct answer in assumption questions is to negate the answer choice and check if it affects the credibiity of the statement. If it does, this is your assumption, else move to the next choice. We'll apply this method here to determine the correct choice.

A. The Essential Air Service program is not drastically different than the government airline programs in the 60’s and 70’s.
 This is not an assumption. If you assume that the Essential air Service program is drastically different than the govt. airline programs in the 60's and 70's, it has no effect on the highlighted statement. 
 
B. Government subsidy programs have not improved dramatically since the 60’s and 70’s.
 Even if we assume that govt. subsidy programs have improved drastically improved, this is not what the author talks about. We are only concerned with the Essential Air Service program.
 
C. Public transportation systems are not better today than they were in the 60’s and 70’s.
 Out of scope.
 
D. The Essential Air Service program is not going to change dramatically and remove some of the most inefficient routes.
 The reason why Essential air Service program was unprofitable and inefficient was that it operated on unprofitable routes where internet was neither required not important. If, however, the program changes dramatically and removes some of the most inefficient routes, it can be the stalwart for true merit good and would no longer be called inefficient. Thus, this qualifies as one of the assumptions underlying the argument. This is the correct choice.

E. The need for the Essential Air Service program has not increased dramatically over the past few years.
 This is not an assumption. Can be diregarded as the correct answer.

Correct answer - (D)

Sajjad1994 · Answer

Hell all

OAs of this RC posted now, if anyone needs OE or have any question let me know.

1. B
2. B
3. A

The best explanation here is from  AnirudhaS

Good Luck

anushavalecha · Answer

Hello Sajjad,

Could you please help with OA and reasoning for Q3.
TIA

Sajjad1994 · Answer

Official Explanation

3. The author’s highlighted statement at the end of the passage assumes which of the following:

Difficulty Level:   700

Explanation

This is essentially a critical reasoning strengthen question using a part of the passage as the argument. The highlighted portion reads:  All you need to do is look at the Essential Air Service program to understand the wastefulness and inefficiency that existed in the 60’s and 70’s when most public transportation systems were under full government control.  What does this argument assume? It assumes that the Essential Air Service is more or less similar to the situations in the 60’s and 70’s when full government control existed. No evidence is given for this so  (A)  is essential to the argument, as it removes the possibility that they were very different.

Remember:  on this type of assumption question with lots of negated answer choices, read them affirmatively to see if they weaken the argument (assumption-negation technique). For  (A) , the correct answer, if the Essential Air Service program IS drastically different than the government airline programs in the 60’s and 70’s, then the argument is terrible.

In  (B) , if  “Government subsidy programs HAVE improved dramatically since the 60’s and 70’s.”  this actually strengthens his argument as it shows that the ones in the 60’s and 70’s were worse.  (B)  is thus not correct as it does the opposite of what is required.

(C)  is very similar to  (B)  and incorrect for exactly the same reason.

(D)  is irrelevant to the argument because the argument does not hinge on what will happen in the future.

For  (E) , if the need HAS increased dramatically that does not weaken his argument so it is also incorrect.

Answer is (A).

Hope it helps

Kali123 · Answer

OE Explanation for Q.No.2 please

Sajjad1994 · Answer

Official Explanation

2. All of the following can be properly inferred from the passage EXCEPT:

Difficulty Level:   700

Explanation

For this problem you must go through each answer choice and try to confirm it from the passage. The correct answer is the one you CANNOT infer from the passage.

(A) and (D)  are both relatively easy to find in the last paragraph and must be true.

(C)  can be confirmed in the first sentence of the second paragraph and  (E)  is found in the  3rd paragraph.

(B)  is the correct answer as there is no evidence to support it within the passage. In fact it is directly contradicted with the following sentence in the  second paragraph :  “All public transportation systems need some degree of subsidy to run…”

Answer is (B)

Hope it helps

Sri07 · Answer

Please share OE for Q1 Thanks

Sajjad1994 · Answer

Official Explanation

1. The author would most likely agree with government subsidies beyond the required minimum for which of the following companies:

Difficulty Level:   600

Explanation

In this passage, you only learn about the author’s viewpoints regarding privatization and government subsidy in public transportation. As a result, you have no idea how he feels about privatization in other industry types. Because of this you can confidently eliminate answer choices  (A) and (D) .

For the others, you need to find a situation when the concept of merit good applies, as the author states specifically that:  “While there is a place for subsidy and even direct government involvement beyond the required minimum – when true merit good issues are concerned”  In  (B)  you have just that – a deprived group is provided service in remote places on routes that require subsidy to be profitable.

While  (C) and (E)  each address public transportation companies, there is not a situation in which merit good applies so they are incorrect.

Answer is (B).

VerbalBot · Answer

Automated notice from GMAT Club VerbalBot: 

A member just gave Kudos to this thread, showing it’s still useful. I’ve bumped it to the top so more people can benefit. Feel free to add your own questions or solutions.

 This post was generated automatically.

Transit privatization is highly controversial, with proponents claimin

Prep Toolkit

Top 5 GMAT Debrief Videos

615 to 715 in 15 Days (Ria's Strategies)

More than Quant/Verbal Abilities: Speed vs. Accuracy

745 with Only Self-Prep and GMAT Club

From 555 to 765: 210-point Improvement

Perfect 805 Score Debrief by Julia

My Rewards

GMAT Reading Comprehension (RC) Questions

Transit privatization is highly controversial, with proponents claimin

Prep Toolkit

615 to 715 in 15 Days (Ria's Strategies)

More than Quant/Verbal Abilities: Speed vs. Accuracy

745 with Only Self-Prep and GMAT Club

From 555 to 765: 210-point Improvement

Perfect 805 Score Debrief by Julia

My Rewards