A severe drought can actually lessen the total amount of government ai

Question

A severe drought can actually lessen the total amount of government aid that United States farmers receive as a group. The government pays farmers the amount, if any, by which the market price at which crops are actually sold falls short of a preset target price per bushel for the crops. The drought of 1983, for example, caused farm-program payments to drop by $10 billion.

Given the information above, which of the following, if true, best explains why the drought of 1983 resulted in a reduction in farm-program payments?

Given the information above, which of the following, if true, best explains why the drought of 1983 resulted in a reduction in farm-program payments?

(A) Prior to the drought of 1983, the government raised the target price for crops in order to aid farmers in reducing their debt loads.

(B) Due to the drought of 1983, United States farmers exported less food in 1983 than in the preceding year.

(C) Due to the drought of 1983, United States farmers had smaller harvests and thus received a higher market price for the 1983 crop than for the larger crop of the preceding year.

(D) Due to the drought of 1983, United States farmers planned to plant smaller crops in 1984 than they had in 1983.

(E) Despite the drought of 1983, retail prices for food did not increase significantly between 1982 and 1983.

ChrisLele · Accepted Answer

In this question we have to resolve the paradox, i.e. how is it that during times of drought farmers are given less governmental aid.

The argument tells us the stipulations by which farmers receive aid: the government pays them x dollars, where x represents the difference in a preset price and the price at which farmers actually sell their crops

For example, if the government sets a price of $10/barrel of corn, and farmers are only able to sell their corn at $8/barrel, the government will pay them the difference.

According to the prompt, there is a drought in 1983, and while it may seem reasonable that the government will have to help the farmers, that is not the case. The question asks us to choose an answer that can account for this discrepancy.

(A) INCORRECT This answer fails to account for the paradox because it states that the government set the preset price so high that farmers were likely not to be able sell their crops at such a price. Therefore, the government would have to provide aid (its incentive would be to help farmers struggling with debt).

(B) INCORRECT We are not concerned with the amount of food exported but the price of food. Out of scope.

(C) CORRECT This answer choice gives a reason why a drought year would actually drive the price of crops higher than usual (and thus higher than the government preset price).

Think of it this way: corns was rare in the drought year (1983) so the market price was drive up to $15. If the preset price reflects a typical year, it is going to be much lower (say $10).

Therefore the government does not have to provide as much aid and the overall aid drops compared to that of the previous year.

(D) INCORRECT This focuses on 1984 and fails to account for why the government paid farmers less during the drought year of 1983. Out of scope.

(E) INCORRECT The argument does not discuss retail prices but the prices farmers sell their crops at (market value). Out of scope.

aniket16c · Answer

Argument - Govt aid - in form of the difference in market price and target price set by govt. Drought can decrease this govt aid. In 1983, the govt aid decreased.
Question - Explain the decrease in govt aid provided in 1983

(A) Prior to the drought of 1983, the government raised the target price for crops in order to aid farmers in reducing their debt loads.
- If govt raised the target price + considering that the market price was constant - the aid should actually increase
- Wrong

(B) Due to the drought of 1983, United States farmers exported less food in 1983 than in the preceding year.
- Exported less food --> more food available for domestic use --> supply increases --> prices can actually drop --> aid should increase and not decrease
- Wrong

(C) Due to the drought of 1983, United States farmers had smaller harvests and thus received a higher market price for the 1983 crop than for the larger crop of the preceding year.
- Smaller harvest --> market price increase --> (assumption that the govt did not decrease/increase the target price with respect to previous year) --> The difference in market price and target price decreased --> aid decreased
- Correct

(D) Due to the drought of 1983, United States farmers planned to plant smaller crops in 1984 than they had in 1983.
- The argument focuses on the plantation in 1983 - Out of scope
- Wrong

(E) Despite the drought of 1983, retail prices for food did not increase significantly between 1982 and 1983.
- If retail prices did not increase + govt aid remained fairly constant --> the aid provided should not change 
- Wrong

aimat780 · Answer

(A) Prior to the drought of 1983, the government raised the target price for crops in order to aid farmers in reducing their debt loads:  Wrong, this option does not talks about the gap b/w market price & target price. Only target price is increased, nothing has been mentioned about market price (we don't know if it would increased, decrease or stayed constant)

(B) Due to the drought of 1983, United States farmers exported less food in 1983 than in the preceding year:  Wrong, Argument has nothing to do with the 'exports'

(C) Due to the drought of 1983, United States farmers had smaller harvests and thus received a higher market price for the 1983 crop than for the larger crop of the preceding year:  Bingo, correct one

(D) Due to the drought of 1983, United States farmers planned to plant smaller crops in 1984 than they had in 1983:  1984?? we are talking about 1983, Chuck it

(E) Despite the drought of 1983, retail prices for food did not increase significantly between 1982 and 1983:  Wrong, No mention of difference b/w target price and retail/ market price

Please give kudos if this solution helps!!

PyjamaScientist · Answer

I just failed to understand what the question stem was trying to convey. How the government gave the aid, the difference between the preset and the market price, etc. This all just went way above my head after reading the question stem. I even tried re-reading it, but just could not totally grasp what the question stem was trying to convey here.

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~vidyaya amrutam ashnute~
My Debrief: From 430 to 740.

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mSKR · Answer

Basically we need to find a reason why this year government doesn't need to pay to farmers.

In Normal scenarios: government pays when farmers couldn't get the market price

Draught year: What in general may happen? Price may be much higher due to shortage of supply

So which option says that in draught years government doesn't need to pay?
You will find option  C suits well

I hope you can crack it now

PyjamaScientist · Answer

Thanks man. But I think there's a typo error. You meant Option C not D, right?

mSKR · Answer

yup! I have updated.

thanks!

Sneha2021 · Answer

(C) Due to the drought of 1983, United States farmers had smaller harvests and thus received a higher market price for the 1983 crop than for the larger crop of the preceding year.

Acc to the statement the gap between market price and target prices increase, then why the govt aid was decreased?

Can someone please explain?

mSKR · Answer

A severe drought can actually lessen the total amount of government aid that United States farmers receive as a group.
>> It means government needs to pay less when drought happens. 
Why in 1983 , government paid less?
because : prices increased, farmers get more money, and government needs to pay less 
 ( key point = government support farmers to get money to some threshold .The threshold decreased during drought )

I hope it is clear

btsaami · Answer

Situation:   The drought of 1983, for example, caused farm-program payments to drop by $10 billion.
 Paradox:  The drought of 1983 reduced the govt assistance for farmers instead of higher assistance. Drought → lower harvests → farmers struggle → aid should go up.
Actual: Aid went down.
 Prethinking:  If the market price became higher than the target price then the farmer's assistance will reduce.
 Options:  
(A) Prior to the drought of 1983, the government raised the target price for crops in order to aid farmers in reducing their debt loads. -> If target price rises, the assistance should have been more and there would have been no loss of 10billion. Opp effect.

(B) Due to the drought of 1983, United States farmers exported less food in 1983 than in the preceding year. -> Irrelevant. Exported less food maybe either due to reduction in demand or supply. In case of drought, supply reduced but doesn't establish why the assistance dropped.

(C) Due to the drought of 1983, United States farmers had smaller harvests and thus received a higher market price for the 1983 crop than for the larger crop of the preceding year.

Acc to the statement the gap between market price and target prices increase, then why the govt aid was decreased?

Can someone please explain?

(D) Due to the drought of 1983, United States farmers planned to plant smaller crops in 1984 than they had in 1983. -> Irrelevant. Future reference

(E) Despite the drought of 1983, retail prices for food did not increase significantly between 1982 and 1983. -> If market price didnt rise, this doesnt explain the assistance loss. The assistance should have been the same. Second even if retail price was flat, the farmer market price could have increased.

A severe drought can actually lessen the total amount of government ai

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A severe drought can actually lessen the total amount of government ai

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