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Farmers

by umaa » Tue Feb 03, 2009 8:41 pm
Under the agricultural policies of Country R, farmers can sell any grain not sold on the open market to a grain board at guaranteed prices. It seems inevitable that, in order to curb the resultant escalating overproduction, the grain board will in just a few years have to impose quaotas on grain production, limiting farmers to a certain flat percentage of the grain acreage they cultivated previously.
Suppose an individual farmer in country R wishes to minimize the impact on profits of the grain quota whose eventual imposition is being predidcted. If the farmer could do any of the following and wants to select the most effective course of action, which should the farmer do now?
(A) Select in advance currently less profitable grain fields and retire them if the quota takes effect.
(B) Seek long-term contracts to sell grain at a fixed price
(C) Replace obsolete tractors with more efficient new ones
(D) Put marginal land under cultivation and grow grain on it
(E) Agree with other farmers on voluntary cutbacks in grain production

Long back I answered to this question. But didn't get any reply from the poster.

My choice is, A. Please let me know your suggestions. Also, please post the OA if you know the source of this question.
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by cartera » Tue Feb 03, 2009 10:11 pm
Imo B
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by sacx » Wed Feb 04, 2009 4:08 am
IMO E

Assumption: since farmers will keep getting the guaranteed price they will keep increasing the production.

Also, since farmers are selling their produce to grain board and increasing the production it means they are making profit by selling it to the grain board

So we need to look at an answer which negates the assumption, hence answer choice E
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by gmatmachoman » Thu Feb 05, 2009 6:34 am
iam stuck with the answer.
any one can post with explanations?
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by Argen » Thu Feb 05, 2009 8:38 am
IMO B.

The assumption is that farmers will keep increasing production because the guaranteed price is higher than the cost of production. The assumption is based on the price level of the grain. The stem provides a second evidence that production will be cut. Therefore the farmers need to to negotiate a fixed price to minimize profit loss.
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by Bidisha800 » Thu Feb 05, 2009 8:48 pm
(B)

Do you have OA ?
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by sjd00d » Thu Feb 05, 2009 11:52 pm
IMO A
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Re: Farmers

by piyush_nitt » Fri Feb 06, 2009 2:08 am
umaa wrote:Under the agricultural policies of Country R, farmers can sell any grain not sold on the open market to a grain board at guaranteed prices. It seems inevitable that, in order to curb the resultant escalating overproduction, the grain board will in just a few years have to impose quaotas on grain production, limiting farmers to a certain flat percentage of the grain acreage they cultivated previously.
Suppose an individual farmer in country R wishes to minimize the impact on profits of the grain quota whose eventual imposition is being predidcted. If the farmer could do any of the following and wants to select the most effective course of action, which should the farmer do now?
(A) Select in advance currently less profitable grain fields and retire them if the quota takes effect.
(B) Seek long-term contracts to sell grain at a fixed price
(C) Replace obsolete tractors with more efficient new ones
(D) Put marginal land under cultivation and grow grain on it
(E) Agree with other farmers on voluntary cutbacks in grain production

Long back I answered to this question. But didn't get any reply from the poster.

My choice is, A. Please let me know your suggestions. Also, please post the OA if you know the source of this question.
IMO A

limiting farmers to a certain flat percentage of the grain acreage they cultivated previously.

After imposition of Quotas , farmers can cultivate only certain percentage of land less than previous year. so if farmers keep on cultivating the same acreage then on imposition of quotas , there has to be decline in the profits. As less land , less production.

BUT If a farmer cultivates on additional land , then on imposition of quotas they can forgo the additional land without hampering their profits.

OA pls?
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by srn » Fri Feb 06, 2009 3:22 am
IMO B
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by umaa » Fri Feb 06, 2009 6:51 am
I don't have the OA. I responded to this one long before in BTG. But didn't get the OA. If anyone knows the OA, pls respond.
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by sjd00d » Fri Feb 06, 2009 10:16 am
Since there's no consensus or OA, i am going to take a stab at explaining the rationale and see how that goes.

B is wrong the problem is that of overcapacity and not so much of the sales price. After the regulation, they are going to have inventory left which cost them not only during production but possibly maintenance etc. as well. Fixing a set price doesn't do much and as such a variable price was never a problem. Now, to offset the overcapacity cost, they could potentially raise the price but i don't think folks will buy it coz remember you can charge higher when demand outweighs the supply which is clearly not the case here. So, given the same cost and increased capacity, they are sure to loose profit.

E is tempting coz it deals with the overcapacity and i wouldn't be surprised if that is the OA but I don't think its right coz it is not the "most effective course action.."

A is good coz it cuts the supply of less profitable grain fields. Deals with the main problem and deals with it effectively
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by Karen » Wed Feb 11, 2009 10:53 am
I believe the correct answer is D. The question says that *in a few years*, they'll have to impose quotas limiting farmers to a certain percentage of the fields they had cultivated before. So the smartest thing a farmer could do *right now* would be to cultivate every scrap of ground he could get his hands on, even if it's terrible land, just so long as it counts as part of his total acreage. Then when the quota takes effect, limiting him to just a percentage of his acreage, he can shift back to only using his good, productive land. That's D.

To make an analogy, suppose that the government said that, to save the environment, it would impose quotas on driving in 2010, such that everyone who owns a car is allowed to drive only 75% the number of miles that he or she drove in 2009. Someone who wanted to make sure of being able to drive everywhere that he wants to in 2010 would be smart to just start driving all over the place in 2009, even with no particular goal, just to accumulate more mileage. Then 75% of the total would be about the number he actually wanted.

Edited to add: A isn't the best choice because it doesn't maximize the profits. A is just saying that the person should plan now to determine what he's going to lose when the quotas take effect. But D says that by being clever, the person may actually be able to reduce his losses -- when the quota takes effect, he'll just stop using the less-good land. (I'm assuming "marginal" means "marginally acceptable," but even if it means "land around the margins of his current fields," with no implication about the quality of the land, it still amounts to the advice that the farmer increase his acreage so that the future cuts won't hurt his profits as much.)
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by sjd00d » Wed Feb 11, 2009 2:48 pm
Karen wrote:I believe the correct answer is D. The question says that *in a few years*, they'll have to impose quotas limiting farmers to a certain percentage of the fields they had cultivated before. So the smartest thing a farmer could do *right now* would be to cultivate every scrap of ground he could get his hands on, even if it's terrible land, just so long as it counts as part of his total acreage. Then when the quota takes effect, limiting him to just a percentage of his acreage, he can shift back to only using his good, productive land. That's D.

To make an analogy, suppose that the government said that, to save the environment, it would impose quotas on driving in 2010, such that everyone who owns a car is allowed to drive only 75% the number of miles that he or she drove in 2009. Someone who wanted to make sure of being able to drive everywhere that he wants to in 2010 would be smart to just start driving all over the place in 2009, even with no particular goal, just to accumulate more mileage. Then 75% of the total would be about the number he actually wanted.

Edited to add: A isn't the best choice because it doesn't maximize the profits. A is just saying that the person should plan now to determine what he's going to lose when the quotas take effect. But D says that by being clever, the person may actually be able to reduce his losses -- when the quota takes effect, he'll just stop using the less-good land. (I'm assuming "marginal" means "marginally acceptable," but even if it means "land around the margins of his current fields," with no implication about the quality of the land, it still amounts to the advice that the farmer increase his acreage so that the future cuts won't hurt his profits as much.)
Good one. I am sold!!! Key I guess is "flat percentage of the grain acreage"
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by mason77 » Sat May 14, 2016 12:54 am
In my opinion B looks better than other choices
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