According to conventional economic theory, the economic value of

Question

According to conventional economic theory, the economic value of a good or service is determined by the extent to which individuals desire the good or service. For goods and services (such as groceries) that are soon "used up," and that are traded in well-functioning markets in which consumers understand the product and its benefits reasonably well, market valuations can readily be calculated. But calculating the economic value of  ecological goods (natural resources) and services (such as wetland preservation or global climate control)  is more difficult, since they may last indefinitely and are generally not traded in markets (no one owns the air or water). Nor do individuals well understand the personal benefits of natural resources and ecological services. To determine the value of such goods and services, economists ask individuals what they would be willing to pay in a hypothetical market-for example, the maximum fees that they would be willing to pay to use national parks. This approach is problematic not only because of individuals' imperfect understanding of the benefits to themselves but also because of its inability to address possible future changes in people's willingness to pay for ecological goods and services. Moreover, individuals' willingness to pay for natural resources may depend on such factors as whether the expense is borne by all taxpayers or only by those individuals who pay user fees.    1 
The author of the passage would be most likely to agree with which of the following statements about ecological goods and services?

A. Their economic value to individuals may be influenced by how the costs of the good or service are distributed.
B. Their monetary value is usually overestimated by economists utilizing conventional economic theory.
C. Their economic value to individuals can best be determined by ascertaining the maximum fees that people would be willing to pay for such goods and services.
D. People may understand the short-term benefits of such goods and services better than they understand the future benefits of such goods and services.
E. The main obstacle to calculating the economic value of such goods and services is the indefinite length of time over which they may exist.

2  
The passage states that ecological goods and services differ from the goods and services mentioned in the highlighted text in that ecological goods and services

A. have fewer lasting benefits
B. are not usually traded in markets
C. are more likely to be paid for through taxes
D. are less willingly paid for by consumers
E. do not have an economic value that can be calculated

3  
The author of the passage mentions "possible future changes" in the highlighted text most likely in order to

A. caution against the assumption that taxes are the best way to pay for many ecological goods and services
B. cite a factor that could affect economists' calculations of the economic value of ecological goods and services
C. explain why some economists are attempting to develop new methods for calculating the monetary value of ecological goods and services
D. suggest that people are likely to become more aware of the personal benefits of natural resources and ecological services
E. point out that ecological goods and services are likely to become increasingly costly

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aakarsh1001 · Answer

Can someone help with Q1? why is it not D?  Sajjad1994   GMATNinja   GMATNinja Two

hakhan96 · Answer

Its not D because the passage states: " Nor do individuals well understand the personal benefits of natural resources and ecological services"
In the passage it does not define either understanding is short term or long term for the personal benefits.
In option D it is adding information that is not being backed by anything in the passage, hence it is incorrect

A is correct as it states in the passage " Moreover, individuals' willingness to pay for natural resources may depend on such factors as whether the expense is borne by all taxpayers or only by those individuals who pay user fees."

OKELO · Answer

in question 2,why not E Someone please explain?

EloiseDU19 · Answer

Hi,

The passage mentions " But calculating the economic value of ecological goods (natural resources) and services (such as wetland preservation or global climate control) is more difficult, since they may last indefinitely and are generally not traded in markets (no one owns the air or water).  " Measuring the economic value of ecological goods and services is  difficult  does NOT mean they don't possess any value.

Therefore, E is crossed out since it distorts the meaning of the passage.

Rishitkg · Answer

can someone explain why is option A correct for Q1

GMATNinja · Answer

Question 1

The last sentence is the key:

A couple of sentences before that, we get this lovely thing:

So in this context, "individuals' willingness to pay" and "economic value to individuals" are essentially the same.

So the last sentence tells us that the economic value of ecological goods and services (individuals' willingness to pay for natural resources) may be influenced by (or depend on) certain factors: specifically,  whether the expense is borne by all taxpayers or only by those individuals who pay user fees . That's just a fancy way of saying: "Who's paying for this stuff?" In other words, "How are the costs of those ecological goods and services distributed?"

So choice (A) is actually very close to what's stated in the passage.

I hope that helps!

KumarRishav · Answer

GMATNinja

Hi, In Q1, Why not E? It is directly mentioned in RC.

GMATNinja · Answer

Take another look at the language used in (E):

You're right that the indefinite length of some goods and services is mentioned as an obstacle to calculating their value, but is there any reason to believe that it's the MAIN obstacle? After all, we get plenty of other obstacles: the goods/services aren't traded in markets; consumers might not understand how they value the goods, and so on.

So that word "main" becomes highly problematic, especially when comparing it to another option that's indisputable. When you're down to two options, these are the kinds of subtleties you want to keep in mind.

Your takeaway: always reread your answers choices and look very closely at those modifiers to help you choose between a correct option and one that's close, but ultimately wrong for a very subtle reason.

I hope that helps!

Dream009 · Answer

The author of the passage would be most likely to agree with which of the following statements about ecological goods and services?

A. Their economic value to individuals may be influenced by how the costs of the good or service are distributed.  
 Yes - refer last para  
 "Moreover, individuals' willingness to pay for natural resources may depend on such factors as whether the expense is borne by all taxpayers or only by those individuals who pay user fees."

B. Their monetary value is usually overestimated by economists utilizing conventional economic theory.  No mention of over or underestimate

C. Their economic value to individuals can best be determined by ascertaining the maximum fees that people would be willing to pay for such goods and services.  
 This is not best approach. Has many challenges discussed 
  D. People may understand the short-term benefits of such goods and services better than they understand the future benefits of such goods and services.  Nothing mentioned about this in pars

E. The main obstacle to calculating the economic value of such goods and services is the indefinite length of time over which they may exist.  One of the problem not main

WiziusCareers1 · Answer

This passage contrasts the valuation of standard consumer goods with that of ecological goods and services, highlighting the inherent difficulties economists face when trying to apply conventional market logic to the natural world.

Q1 - This is an Inference question.  We need to identify which statement the author would support based on the specific critiques provided in the text regarding the valuation of ecological goods.
 A) Correct - True:  The final sentence of the passage states that "willingness to pay... may depend on such factors as whether the expense is borne by all taxpayers or only by those individuals who pay user fees." This directly supports the idea that the distribution of costs (taxes vs. fees) influences the perceived economic value.
 B) Incorrect - Out of Scope:  While the author states that the calculation is "problematic" and "difficult," they  never specify whether the resulting value is usually higher  (overestimated) or lower than it should be.
 C) Incorrect - Opposite:  The author describes the  "willingness to pay" method as "problematic"  (lines 14–16). Therefore, the author would not agree that this is the "best" way to determine value; they are pointing out its flaws.
 D) Incorrect - Distorted Details:  The passage says individuals have an  "imperfect understanding"   and do not  "well understand the personal benefits."  It does not draw a specific comparison between their understanding of short-term vs. long-term benefits.
 E) Incorrect - Distorted Details:  The passage lists the indefinite duration as one reason (lines 7–9), but it also lists the lack of market trading and the lack of consumer understanding.  Labeling the duration as the "main obstacle" is an unsupported exaggeration.

Q2 - This is a Detail/Comparison question.  We must identify a specific point of difference mentioned in the text between "groceries" (the highlighted text) and "ecological goods/services."
 A) Incorrect - Opposite:  The passage states that groceries are "soon used up," while ecological goods "may last indefinitely." Therefore,  ecological goods have more lasting benefits , not fewer.
 B) Correct - True:  The passage explicitly states that groceries are "traded in well-functioning markets" (line 4), whereas ecological services are "generally not traded in markets" because  "no one owns the air or water" (lines 9–10). 
 C) Incorrect - True but Irrelevant:  While the author mentions taxes at the end of the passage, this is  discussed as a factor that complicates valuation, not as a primary defining difference between groceries and wetlands  mentioned in the comparison section.
 D) Incorrect - Out of Scope:  The passage discusses how we calculate what people are willing to pay, but it  does not claim that people are inherently "less willing" to pay for clean air  than for groceries.
 E) Incorrect - Extreme Language:  The author says calculating the value is "more difficult" and "problematic," but  does not go so far as to say it cannot be done  or that they "do not have" an economic value.

Q3 - This is a Logical Purpose question.  Why does the author bring up "possible future changes in people's willingness to pay"?
 A) Incorrect - Out of Scope:  The author uses the mention of taxes to show how valuation is complicated, but they  do not take a stance or offer a "caution" against taxes  as a payment method.
 B) Correct - Logical Purpose:  The author mentions future changes as one of the reasons why the current "willingness to pay" approach is "problematic." It is a variable that economists cannot easily account for, thus making their calculations of economic value less reliable.
 C) Incorrect - Out of Scope:  The passage describes the flaws in the current approach, but it  never mentions economists "attempting to develop new methods" to fix these specific problems .
 D) Incorrect - Out of Scope:  The author mentions future changes in willingness to pay, not future changes in awareness of benefits. These are  two different concepts .
 E) Incorrect - Out of Scope:  The "future changes" could mean people are willing to pay less or more; the  author does not suggest a specific trend toward things becoming "increasingly costly."

According to conventional economic theory, the economic value of

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According to conventional economic theory, the economic value of

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