The alfalfa industry requires comparatively large amounts of water. Th

Question

The alfalfa industry requires comparatively large amounts of water. The past decade has seen both a steep rise in the price of water for agriculture and also a rise of 15% in overall profits in the alfalfa industry, even though the market price of alfalfa didn't fluctuate substantially.

Any of the following statements, if true, helps to explain the rise in profits EXCEPT

Any of the following statements, if true, helps to explain the rise in profits EXCEPT

A. The number of alfalfa growers has grown by 25%.

B. The price of shipping and handling has risen by 15%.

C. The formation of the Alfalfa Growers Union has enabled alfalfa growers to obtain substantially lower prices for agricultural machinery.

D. A nationwide best-seller published at the beginning of the decade postulates a healthy diet, in which alfalfa is a staple.

E. New overseas markets for alfalfa have opened recently.

This is a  CR Butler Question

Check the links to other Butler Projects: 
 
   Data Sufficiency Butler 
   Problem Solving Butler  
   Sentence Correction Butler  
   Reading Comprehension Butler  
   Integrated Reasoning Butler

Akkiiii · Answer

B.

If the price of shipping and handling has risen by 15%, it could indeed contribute to increased expenses for the alfalfa growers. This increase in expenses could offset some or all of the increase in profits, depending on the extent to which other factors compensate for it. Therefore, option B could also help explain the rise in profits.

Scholar94 · Answer

I agreed with your answer choice. But your last sentence seems not follow what you intend to achieve. I believe it's a mistake

Option B only explains why the industry profit should have reduced and not not increase...Hence, why it's the correct choice

Posted from my mobile device

diasdexter766 · Answer

Option B works as the increase in prices of shipping and handling risen by 15% would in fact negatively impact the profits, as the increased cost is an additional expense to the increase in water prices for irrigation.

So Option B does nothing to positively impact the conclusion i.e. to increase the profits by 15% but otherwise.

So Option B does nothing to positively impact the conclusion i.e. to increase the profits by 15% but otherwise.

theproductguy · Answer

I was confused between A & B:

To me A doesn’t seem to also explain this paradox. If there are more producers how does it mean the profit will also increase?

Appreciate if someone can help explain this?

Posted from my mobile device

Bunuel · Answer

OFFICIAL EXPLANATION

The alfalfa industry requires comparatively large amounts of water. The past decade has seen both a steep rise in the price of water for agriculture and also a rise of 15% in overall profits in the alfalfa industry, even though the market price of alfalfa didn't fluctuate substantially.

Any of the following statements, if true, helps to explain the rise in profits EXCEPT

Any of the following statements, if true, helps to explain the rise in profits EXCEPT

A. The number of alfalfa growers has grown by 25%.

Incorrect.

This is a Paradox Question, but one that asks you to choose the answer choice which does not help to resolve the paradox of the existing premises (all the others answer choices do):

Premise A: There was a steep rise in the price of water for agriculture (expenses)
✖
Premise B: There was an increase of 15% in profits in the alfalfa industry
✖
Premise C: The market price of alfalfa hasn't changed much (i.e., no greater revenues because of price)

Resolving Premise: ?

If some expenses are higher but there are higher profits in the industry, it means either that (a) revenues (=expenses+profits) are higher too; or (b) other expenses (=revenues-profits) are lower.

The question stem asks you to focus on explaining the rise in profits, therefore focus on premise B. Don't allow the first and third premise to distract you; think what else could explain the increase the amount of money made in alfalfa or lower the costs of alfalfa production... and eliminate all such answer choices.

A steep increase in the number of growers can explain why revenues (and therefore profits) are still high. You need an answer choice which does not explain the paradox.

Wait, but wouldn't an increase in supply actually drive down prices, and lead to lower profits?

It's true that according to economic theory prices are a function of demand, but we must be careful about making more assumptions than are necessary in solving this CR question. Remember the following:

a) The question belongs to the Profits/Revenues/Expenses type. Therefore, limit your reasoning to the application of this formula. Don't import another economic rule (in this case laws of supply and demand) which is not known to be utilized in CR questions.

b) Even if we were to assume that the grow in supply led to a price decrease, this would still not tell us whether the price decrease affected profits. It could always be that reduction of revenue due to price decreases was offset by the economy of scale, and did not affect profit adversely.

Because of these considerations, this answer choice is not the best of all the answer choices.

B. The price of shipping and handling has risen by 15%.

If the alfalfa growers are forced to pay more for getting their produce to markets, the paradox of the profits of the alfalfa industry growing by 15% is emphasized, not resolved.

C. The formation of the Alfalfa Growers Union has enabled alfalfa growers to obtain substantially lower prices for agricultural machinery.

Incorrect.

This is a Paradox Question, but one that asks you to choose the answer choice which does not help to resolve the paradox of the existing premises (all the others answer choices do):

Premise A: There was a steep rise in the price of water for agriculture (expenses)
✖
Premise B: There was an increase of 15% in profits in the alfalfa industry
✖
Premise C: The market price of alfalfa hasn't changed much (i.e., no greater revenues because of price)

Resolving Premise: ?

If some expenses are higher but there are higher profits in the industry, it means either that (a) revenues (=expenses+profits) are higher too; or (b) other expenses (=revenues-profits) are lower.

The question stem asks you to focus on explaining the rise in profits, therefore focus on premise B. Don't allow the first and third premise to distract you; think what else could explain the increase the amount of money made in alfalfa or lower the costs of alfalfa production... and eliminate all such answer choices.

A substantially lower price for machinery, a major drop in expenses, could explain how profits grew despite higher water prices. You need an answer choice which does not explain the paradox.

D. A nationwide best-seller published at the beginning of the decade postulates a healthy diet, in which alfalfa is a staple.

Incorrect.

A nationwide best-seller telling people to eat alfalfa? Yep, this could definitely help explain higher revenues and therefore higher profits. You need an answer choice which does not explain the paradox.

E. New overseas markets for alfalfa have opened recently.

Incorrect.

The opening of new overseas markets could explain the rise in revenues and therefore in profits. You need an answer choice which does not explain the paradox.

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.

The alfalfa industry requires comparatively large amounts of water. Th

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

The alfalfa industry requires comparatively large amounts of water. Th

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