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Really tough CR !!

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dhonu121 GMAT Destroyer! Default Avatar
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Really tough CR !! Post Wed May 16, 2012 10:05 am
Elapsed Time: 00:00
  • Lap #[LAPCOUNT] ([LAPTIME])
    The cotton farms of Country Q became so productive that the market could not absorb all that they
    produced. Consequently, cotton prices fell. The government tried to boost cotton prices by offering farmers who
    took 25 percent of their cotton acreage out of production direct support payments up to a specified maximum per
    farm.
    The government's program, if successful, will not be a net burden on the budget. Which of the following, if
    true, is the best basis for an explanation of how this could be so?
    (A) Depressed cotton prices meant operating losses for cotton farms, and the government lost revenue from
    taxes on farm profits.
    (B) Cotton production in several counties other than Q declined slightly the year that the support-payment
    program went into effect in Q.
    (C) The first year that the support-payment program was in effect, cotton acreage in Q was 5% below its level
    in the base year for the program.
    (D) The specified maximum per farm meant that for very large cotton farms the support payments were less
    per acre for those acres that were withdrawn from production than they were for smaller farms.
    (E) Farmers who wished to qualify for support payments could not use the cotton acreage that was withdrawn
    from production to grow any other crop.

    While the OA to this problem is A, I have this hell of a doubt. Smile
    I have the following argument to contest between A and D. While I see how A is correct, but with the following logic, I am not able to rule out D as clearly as I should. Please help.
    Now the stimulus says,
    "The government's program, if successful, will not be a net burden on the budget. Which of the following, if true, is the best basis for an explanation of how this could be so?"

    D says that the proposal the goverment has made is done keeping in mind that bigger farms whose 25% is more than smaller farms' 25% should get money upto a certain maximum. This shows that the goverment has already set a limit keeping in mind that this policy does not causes a net burden on it.

    How do we counter this argument ?

    Please help me out here.

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    transfer9858 Rising GMAT Star Default Avatar
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    Post Wed May 16, 2012 11:55 am
    Funny because I just took a practice test and this was my last CR question- I got to the answer by process of elimination.

    A is correct because there looking for a reason why the program will actually help the government. A says that currently, because of the lowered prices, the government is getting hurt since its losing revenue from the taxes on the farm profits. If the program is successful, the prices will be raised, thus increasing operating expenses, thus NOT causing the government to lose revenue... understand?

    I don't like A, however because it doesn't specify that the revenues lost from the operating expenses will equall or surpass the money spent on the program, raising the cotton prices. However, it was the only one that could have worked so I went with it. The other choices are all wordy and confusing which makes this question really hard.

    joshmachine Just gettin' started! Default Avatar
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    Post Wed May 16, 2012 2:35 pm
    From the passage: To boost cotton prices  farmer take out 25% production and govt pays farmer money for that.
    Understanding: For this relationship to exist (no net burden on budget), government should receive some money from farmer’s above action which it can pass back to farmer.

    A - prices of cotton decrease, less revenue for gov in form of taxes.
    IMO: A

    eagleeye GMAT Destroyer!
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    Post Wed May 16, 2012 3:18 pm
    Hi All:
    Let me settle this one. It seems to me that the confusion is between A and D, so I will only focus on these two.

    Before doing that, let’s look at the question:

    The question is asking us that how to explain the idea that the government giving away money and yet ending up with “no net burden”. In other words, there has to be a source of money coming in that balances out this extra money going out to the farmers who comply with the 25% reduction. With this in mind, let’s look at the two options.

    (A) Depressed cotton prices meant operating losses for cotton farms, and the government lost revenue from taxes on farm profits.

    This option tells us that even though the government gave money away, that money went towards raising the depressed prices (because they tell us that the government’s program is successful in the question stem). This leads to the government recuperating some of the losses on farm profits. This is how the government gets some of the money back.

    Now let’s look at D.

    (D) The specified maximum per farm meant that for very large cotton farms the support payments were less per acre for those acres that were withdrawn from production than they were for smaller farms.

    This option tells us that the government had to pay less per acreage decrease for the larger farms. It does not talk about how the government was able to make the money back, so that the net budget was balanced.

    Hence (A) is the clear winner as the “best” choice.

    GmatKiss GMAT Titan Default Avatar
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    Post Thu May 17, 2012 2:48 am
    Its down to A and D.

    A is better!!

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