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MGMAT CAT CR

by [email protected] » Tue Apr 06, 2010 1:30 am
Farmers in developing countries claim that the United States government, through farm subsidies, is responsible for the artificially low global price of wheat. Because the U.S. government buys whatever wheat American farmers are unable to sell on the open market, American farmers have no incentive to modulate the size of their crops according to the needs of the global market. As a result, American farmers routinely produce more wheat than the global market can absorb and the global price of wheat is kept low. Without these subsidies, the farmers in developing economies claim, American farmers would produce only the amount of wheat that they could sell on the open market and the global price of wheat would rise.

Which of the following, if true, most weakens the claims of the farmers in developing countries regarding the price of wheat?

Wheat that is not processed for consumption is often used for certain industrial applications.

Non-governmental buyers of wheat and wheat products are able to predict how much wheat they will need several years in advance.

The United States government offers similar subsidies to soybean farmers, though the global price of soybeans is significantly higher than that of wheat.

Other countries, such as Canada and Russia, are likely to produce more wheat if the United States were to reduce its output.

The price of sorghum, a crop for which the United States government offers no subsidies, is lower than that of wheat.
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by [email protected] » Tue Apr 06, 2010 1:31 am
The answer is D.

But, I thought that is out of the scope. Please explain ?
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by Phirozz » Tue Apr 06, 2010 3:10 am
[email protected] wrote:Farmers in developing countries claim that the United States government, through farm subsidies, is responsible for the artificially low global price of wheat. Because the U.S. government buys whatever wheat American farmers are unable to sell on the open market, American farmers have no incentive to modulate the size of their crops according to the needs of the global market. As a result, American farmers routinely produce more wheat than the global market can absorb and the global price of wheat is kept low. Without these subsidies, the farmers in developing economies claim, American farmers would produce only the amount of wheat that they could sell on the open market and the global price of wheat would rise.

Which of the following, if true, most weakens the claims of the farmers in developing countries regarding the price of wheat?

Wheat that is not processed for consumption is often used for certain industrial applications.

Non-governmental buyers of wheat and wheat products are able to predict how much wheat they will need several years in advance.

The United States government offers similar subsidies to soybean farmers, though the global price of soybeans is significantly higher than that of wheat.

Other countries, such as Canada and Russia, are likely to produce more wheat if the United States were to reduce its output.

The price of sorghum, a crop for which the United States government offers no subsidies, is lower than that of wheat.

Conclusion is ''wheat price would rise in global market if U S govt stop subsidies''.

As per D, if U S reduces production of wheat then other countries are likely to produce more. So the less production in U S will be compensated by more production in other countries, so there would be no effect on price of wheat. It clearly weekens the argument.
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by gmatmachoman » Tue Apr 06, 2010 4:19 am
Wonderful reasoning phirozz!!
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by ansumania » Tue May 18, 2010 8:27 pm
still fail to understand why can't C and E be correct.....Pl. explain
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by amitu » Wed May 19, 2010 4:42 am
very good point in the question

in the big passage like this never forget the conclusion . the conclusion holds the key .
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by gtvisa2002 » Wed May 19, 2010 10:30 am
Phirozz wrote:
Conclusion is ''wheat price would rise in global market if U S govt stop subsidies''.

As per D, if U S reduces production of wheat then other countries are likely to produce more. So the less production in U S will be compensated by more production in other countries, so there would be no effect on price of wheat. It clearly weekens the argument.
However, we are not sure Canda and Russia will produce without considering the demand.... If those farmers produce more but not more than the demand, the price would still be normal.

On the other hand, a similar offer by US gov for soybean didn't impact the price negatively then there must be some other reason for the reduction in Wheat price....

Please correct me if I am wrong.
Thanks.
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by ballubalraj » Thu May 20, 2010 1:41 am
gtvisa2002 wrote:
Phirozz wrote:
Conclusion is ''wheat price would rise in global market if U S govt stop subsidies''.

As per D, if U S reduces production of wheat then other countries are likely to produce more. So the less production in U S will be compensated by more production in other countries, so there would be no effect on price of wheat. It clearly weekens the argument.
However, we are not sure Canda and Russia will produce without considering the demand.... If those farmers produce more but not more than the demand, the price would still be normal.

On the other hand, a similar offer by US gov for soybean didn't impact the price negatively then there must be some other reason for the reduction in Wheat price....

Please correct me if I am wrong.
Thanks.
Option D says that Canada and Russia may produce more wheat. So, if they do, the wheat prices will not go up which is weakens the conclusion.

It is not mentioned that Soybean's prices are not impacted, rather it says that Soybean prices are higher, which is very likely as every grain will have a different price.

Similarly, sorghum, which does not have any subsidy, could sell at lower price. Because other details are not mentioned about these 2 grains, their absolute prices can not be compared with that of wheat's.

Makes sense?
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by ansumania » Thu May 20, 2010 4:48 am
yes...thanks
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by gtvisa2002 » Thu May 20, 2010 6:23 am
ballubalraj wrote:
gtvisa2002 wrote:
Phirozz wrote:
Conclusion is ''wheat price would rise in global market if U S govt stop subsidies''.

As per D, if U S reduces production of wheat then other countries are likely to produce more. So the less production in U S will be compensated by more production in other countries, so there would be no effect on price of wheat. It clearly weekens the argument.
However, we are not sure Canda and Russia will produce without considering the demand.... If those farmers produce more but not more than the demand, the price would still be normal.

On the other hand, a similar offer by US gov for soybean didn't impact the price negatively then there must be some other reason for the reduction in Wheat price....

Please correct me if I am wrong.
Thanks.
Option D says that Canada and Russia may produce more wheat. So, if they do, the wheat prices will not go up which is weakens the conclusion.

It is not mentioned that Soybean's prices are not impacted, rather it says that Soybean prices are higher, which is very likely as every grain will have a different price.

Similarly, sorghum, which does not have any subsidy, could sell at lower price. Because other details are not mentioned about these 2 grains, their absolute prices can not be compared with that of wheat's.

Makes sense?
Yes it does. However if you justify that other parameters are not given and so we can not compare wheat and soybean.
Similarly, nothing is mentioned about Canadian and Russian governments' actions.

Arg says
Because the U.S. government buys whatever wheat American farmers are unable to sell on the open market, American farmers have no incentive to modulate the size of their crops according to the needs of the global market.

What if the other govs didnt buy Wheat, so farmers will not produce more than the demand.
And also the statement says "more likely to produce more wheat" - doesn't mean they will produce more than the demand.

I am just trying to understand....
Anyways thanks for your reply.
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