Critical Reasoning

The oil wells of Barlandia produced so much oil that the market was overwhelmed; consumption did not keep pace with production. As a result, oil prices fell. The government of Barlandia attempted to support oil prices through a subsidy scheme: oil producers who voluntarily limited the amount of oil they produced were compensated directly by the government up to a specified maximum payment.

The program instituted by the government of Barlandia, if successful, will not be a net cost to the government. Which of the following, if true, is the best basis for an explanation of how this could be true?

1)Depressed oil prices meant operating losses for oil producers, decreasing the income of oil producers, and thus decreasing the taxes paid to the government by oil producers

2)Oil production in countries other than Barlandia declined in the same year that Barlandia's government instituted the compensatory scheme.

3) In the first quarter after Barlandia's government instituted the compensatory scheme, oil production declined 8 percent

4) Because the government specified a maximum subsidy payment per oil producer, those producers with numerous wells in production received less support per well than those producers with fewer wells in production

5) Oil producers desiring to qualify for the compensatory scheme could not continue to produce oil and simply withhold it from the market.


Hi why is option 4 wrong here.OA ia 1 here. I fail to understand y? Option 1 istalking about decreasing the taxes. If taxes decreses it will be a loss to the govt. and would serve as an additional cost which will weaken the argument and not strenghten it. Isn't it?

A - even if A is true, the income of the government will reduce & we are talking about the cost to the government.
B - out of scope.
D- assume there r only couple of owners with numerous wells & there are hundreds of owners owning less no of wells individually. if D is true, then the cost to the government will actually increase.
E - extreme answer.
C - now if there are signs of oil production declining, it might actually help the government bcoz the gap between the government specified limit and the oil producer's oil production capacity will be less. hence the government will have to dole out comparitively less.

hence IMO C.

OA is A

The question is similar to

https://www.beatthegmat.com/og-10th-edit ... t8307.html

I believe the answer should be A