For large farms to be as productive as they can be

Question

For large farms to be as productive as they can be, their owners need to invest heavily in expensive machinery. This typically requires them to go into considerable debt, and interest on this debt is then a significant fixed cost. This high fixed cost makes those farmers vulnerable to operating losses if the prices of their products drop.

The information above best supports which of the following inferences about large farms?

(A) They can be highly productive without being profitable.
(B) They tend to be so highly productive that they drive down market prices.
(C) They tend to be consistently profitable if their owners borrow at low interest rates.
(D) They respond to operating losses by increasing their productivity.
(E) They cannot be profitable if their owners depend on credit.

OptimusPrepJanielle · Accepted Answer

Productivity depends on machines, machines are expensive, owners are in debt with significant interest.
This is the cycle. If the price of the product drops, the profit will also drop without affecting the productivity.

Hence the owners can be highly productive without being profitable.
Option A

GMATAcademy · Answer

It is easier to support the idea that something might/might not/could/etc happen than it is to support the claim that something definitively will or definitively will not happen. It is easier to support the claim that something may be the case than to support the idea that something is the case.

In other words, it is easier to support a claim that uses weak language than it is to support a claim with very strong language.

For inference questions, this means that the right answer (the best supported inference) is more likely to use weak language.

I find this especially helpful to consider when I'm grappling between two answer choices. The level of language often offers an opportunity to poke a hole in an answer choice.

If we are grapping between A and E, we can notice that A uses the weak 'can' and E uses the strong 'cannot'.

We can poke a hole in E if we can just think of ONE scenario in which an owner depends on credit despite the fact that his farm is profitable. Well it's possible that the farmer simply hasn't paid back all of his debt yet. Maybe he is in the process of paying it back (with the profits from his farm) but still, for a time anyway, depends on credit. Or maybe the farm is very profitable, but the farmer depends on credit to finance the construction of a Bed and Breakfast in the old barn. Or maybe he went into debt paying for his kids to go to college.

We can't poke any such holes in A. To support A we just need enough information that it is  possible   that a farm can be highly productive and remain unprofitable. And we do get that in the stem: we know that in the scenario that the price of a farmer's product drops the farmer can lose money even if he has all the expensive equipment that allows him to be highly productive.

Nevernevergiveup · Answer

For large farms to be as productive  as they can be, their  owners need to invest heavily  in expensive machinery. 
This typically requires them to  go into considerable debt,  and interest on this debt is then a significant fixed cost. 
This high fixed cost makes those farmers  vulnerable to operating losses  if the prices of their products drop.

The information above best supports which of the following inferences about large farms?

(A) They can be highly productive without being profitable.
 (This is the main concern shown in the argument.) 
(B) They tend to be so highly productive that they drive down market prices.
 (The productivity of farm dont drive the market prices drown. There is no such info here.) 
(C) They tend to be consistently profitable if their owners borrow at low interest rates.
 (This is not possible if the prices of the products drop..........cant be inferred.) 
(D) They respond to operating losses by increasing their productivity.
 (This is completely absurd if they are in loss they cannot invest and increase productivity anymore.) 
(E) They cannot be profitable if their owners depend on credit.
 (If the product sell on high prices then they can meet with profits to waive off the credit.)

help151 · Answer

Even though i know that the answer is A, i cant eliminate E
My reasoning is as follows
"This typically requires them to go into considerable debt." I read this line and thought that if the owner didn't need credit in the first place, he would be highly profitable. And that is exactly what is written in option E.

Please explain! Any Verbal Experts willing to take a shot?

nahid78 · Answer

If their owner depend on credit and price don't fall then they can be profitable. So statement E isn't true in all aspect. But option A is true whether price falls or not...

sleepynut · Answer

In my 2 cents,
The key word to eliminate option E is in the last sentence--This high fixed cost makes those farmers  vulnerable  to operating losses if the prices of their.The passage just informs us that the credit makes those farmers susceptible to operate on losses,but doesn't say that they can not make profit.

Skywalker18 · Answer

For large farms to be as productive as they can be, their owners need to invest heavily in expensive machinery. This typically requires them to go into considerable debt, and interest on this debt is then a significant fixed cost. This high fixed cost makes those farmers vulnerable to operating losses if the prices of their products drop.

Type - Inference 
Boil it down- For productivity, owners need to invest in machines and hence go into debt with significant interest. If prices of the products drop, the farmers will face operating losses .But , it will still be highly productive .
(A) They can be highly productive without being profitable. - Correct
(B) They tend to be so highly productive that they drive down market prices.-Out of scope - increase in productivity does not drive down prices
(C) They tend to be consistently profitable if their owners borrow at low-interest rates. - ISWAT - this might be true but does not have to be true
(D) They respond to operating losses by increasing their productivity. - Out of scope
(E) They cannot be profitable if their owners depend on credit. - Incorrect - Profit will depend on selling price of the products

Answer A

pkshankar · Answer

Only 'A' can be inferred based on the provided information. As per 'A' if an owner invests in expensive machinery then the productivity of large farms can be increased to their maximum level possible. Now as the owner has invested in expensive machinery he might have opted for some credit which usually amounts to a considerable amount of debt. While repaying the loan, owner would have to pay the interest amount as well which again is a considerable fixed cost and if the price of the product drops then owner would incur loss at the same time when the productivity of his farm is highest possible. This is what option 'A' says

panshul22 · Answer

VeritasKarishma  - Can you please this question in more detail?

Thanks,
Anshul P

KarishmaB · Answer

panshul22

For large farms to be very productive, expensive machinery is needed.
This requires large debt and interest on this is a big cost.
So operating losses can result if prices of products drop (revenue decreases).

So even though productivity would be high, there could be operating losses if prices drop. We are looking for an inference - something that must be true as per the argument.

(A) They can be highly productive without being profitable.

Correct. We know there can be losses if prices drop even though the farm may be very productive.

(B) They tend to be so highly productive that they drive down market prices.

We don't know what may drive the prices down.

(C) They tend to be consistently profitable if their owners borrow at low interest rates.

No. We don't know how low/high interest rates impact. We just know that interest leads to high fixed cost.

(D) They respond to operating losses by increasing their productivity.

We are discussing what happens when they increase productivity - they could see losses if prices drop. What they do once they see losses, we don't know.

(E) They cannot be profitable if their owners depend on credit.

Not true. They could be profitable if prices of their produce is high. The argument only says that if the prices drop, they could see losses.

Answer (A)

VerbalBot · Answer

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For large farms to be as productive as they can be

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For large farms to be as productive as they can be

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