Source: Princeton Review
The oil wells of Borlandia 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 Borlandia 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 Borlandia, 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?
A. 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.
B. Oil production in countries other than Borlandia declined in the same year that Borlandia's government instituted the compensatory scheme.
C. In the first quarter after Borlandia's government instituted the compensatory scheme, oil production declined 8 percent.
D. 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.
E. Oil producers desiring to qualify for the compensatory scheme could not continue to produce oil and simply withhold it from the market.
The OA is A
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The oil wells of Borlandia produced so much oil that the
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OPTION A :- CORRECT
This option explains the aftermath of depressed oil prices and the effect it will have no the taxes being paid to the government which is perfect explanation to why the program instituted by the government which is to support oil prices through subsidy, needs to be successful so that it wont be a net cost to the government.
OPTION B :- INCORRECT
The country in question in the argument in Borlandia, not another country, So this has no way of helping the Borlandia's government.
OPTION C :- INCORRECT
The fact that oil production declined a percent in the first quarter after Borlandia's government instituted the compensatory scheme does not give a guarantee that it won't be a net cost to the government.
OPTION D :- INCORRECT
If the scheme doesn't apply on all the oil wells or receive less support due to the fact that it is per oil producer, the scheme might not work effectively as expected, and there will be a decrease in the tax being paid to the government which will eventually lead to it being a net cost to the government.
OPTION E :- INCORRECT
This is true, according to the argument, but it isn't enough explanation to show why the scheme won't be a net cost to the government if it is successful.
This option explains the aftermath of depressed oil prices and the effect it will have no the taxes being paid to the government which is perfect explanation to why the program instituted by the government which is to support oil prices through subsidy, needs to be successful so that it wont be a net cost to the government.
OPTION B :- INCORRECT
The country in question in the argument in Borlandia, not another country, So this has no way of helping the Borlandia's government.
OPTION C :- INCORRECT
The fact that oil production declined a percent in the first quarter after Borlandia's government instituted the compensatory scheme does not give a guarantee that it won't be a net cost to the government.
OPTION D :- INCORRECT
If the scheme doesn't apply on all the oil wells or receive less support due to the fact that it is per oil producer, the scheme might not work effectively as expected, and there will be a decrease in the tax being paid to the government which will eventually lead to it being a net cost to the government.
OPTION E :- INCORRECT
This is true, according to the argument, but it isn't enough explanation to show why the scheme won't be a net cost to the government if it is successful.
