According to an official source close to the development, CCEA, headed

Question

According to an official source close to the development, CCEA, headed by the Prime Minister, decided the government would absorb the losses that the power and fertilizer sectors, which are the only two consumers of gas, will face once the regulated gas price is increased. The decision to increase the gas price would cause an annual loss of $420Bn for the power sector dependent on gas, while the fertilizer subsidy would rise by $132Bn a year. On the other hand, the price increase will add $210Bn annually to the profits of public and private sector companies in the gas production sector.

Which of the following can be logically concluded on the basis of the above information?

A. CCEA, headed by the Prime Minister, has the power to increase the regulated gas price

B. The decision to increase the gas price overlooks the losses that will be incurred by the power and fertilizer sectors

C. The optimum price increase can be determined in such a way that the total losses incurred by the power and fertilizer sectors due to price increase is equal to the total profits made by the gas production sector due to price increase.

D. It would be economically wise for the government to provide direct subsidy to the companies in the gas production sector than increase their profits by increasing the gas price.

E. The total subsidies given to the power sector is greater than the total subsidies given to the fertilizer sector

syedazeem3 · Answer

I chose B, given the argument doesn’t mention optimal profits or what’s the wise (as D suggests). Can I get insight on why it’s D?

Thanks

Posted from my mobile device

Perezstephen91 · Answer

Same I chose B there is no mention or inference on what is wise. Need an explain

Posted from my mobile device

exc4libur · Answer

ARGUMENT
  CCEA decided to cover the losses incurred by the power and fertilizer sectors once the regulated gas price increases;
  Power sector dependent on gas will incur $480bln loss;  
  Fertilizer sector's subsidy will rise by $120bln  
  Gas companies will add $210bln in profit.
  Government will need to cover AT LEAST $480+120bln, which is greater than a $210bln increase in profit;

(A) We are not informed who has the power to regulate gas prices;
(B) The decision does not overlook the losses, because it will cover them!
(C) No information about this;
(E) We only know the losses for one part of the power sector, that dependent ON GAS, and we only know the INCREASE in subsidies for the fertilizer sector, not total subsidies;

Answer (D)

YashYashkratos · Answer

It's a conclusion question not an inference question-
D) is the correct answer > the point that the author is trying to make is that loss and subsidy that the government will have to pay for will be more than the gains the gas production sectors will make so instead of raising prices for the gains give the gas production some direct subsidy.

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.

According to an official source close to the development, CCEA, headed

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 Critical Reasoning (CR) Questions

According to an official source close to the development, CCEA, headed

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