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As a result of technological innovations, the corn crop of C

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As a result of technological innovations, the corn crop of C

by conquistador » Fri Mar 04, 2016 7:08 pm
As a result of technological innovations, the corn crop of Country X has been steadily increasing over the last 10 years. The market in Country X can no longer absorb all the corn that is produced, and corn prices have started to fall. The government of Country X announced that it wants to raise corn prices by mandating that 20 percent of this year ' s corn crop be purchased by a newly-created government food reserve program. The government ' s idea, if successful, will not result in a net shortfall in the budget of Country X.

Which of the following, if true, is the best explanation for how this could happen?

A. When corn prices began to drop, corn farmers began to experience operating losses and the government in turn suffered a decline in tax revenue.
B. Corn prices in several neighboring countries rose slightly after the government announcement.
C. An unexpected series of storms reduced this year ' s corn crop by 5 percent.
D. Large farms are expected to request partial exemptions from this mandate because they have higher operating costs.
E. Farmers are not allowed to make arrangements to export excess corn.

OA is A
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by MartyMurray » Fri Mar 04, 2016 10:18 pm
The prompt says that the government is going to spend money to buy corn, and yet somehow that spending is not going to result in a net shortfall in the budget. In other words, buying the corn will somehow have no net cost.

Question: Which of the following, if true, is the best explanation for how this could happen?

To answer the question we need something that indicates that the plan will somehow cause something that will offset the cost of the plan.

(A) When corn prices began to drop, corn farmers began to experience operating losses and the government in turn suffered a decline in tax revenue.

If the government received less revenue when prices went down, then making the price go up should result in the government receiving more revenue. The increase in revenue would offset the cost of the corn purchasing program.

This answer choice is a typical OA to an explain the paradox type of question. It shows that there are side effects to an action taken, and those side effects create the paradoxical results.

(B) Corn prices in several neighboring countries rose slightly after the government announcement.

There is nothing that one can logically infer from this to explain why the plan pays for itself.

C. An unexpected series of storms reduced this year's corn crop by 5 percent.

The point is that if successful the plan will have zero net cost, and this does not explain why that will be the case.

(D) Large farms are expected to request partial exemptions from this mandate because they have higher operating costs.

This indicates that the scope of the plan may be reduced but does not explain why it will have zero net cost.

(E) Farmers are not allowed to make arrangements to export excess corn.

Maybe you could make up in your mind a story that uses this to explain why the plan will have no net cost, but really on its own this does not explain that.

The correct answer is A.
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