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The cotton farms of Country Q became so productive that the market could not absorb all that they produced. Consequently, cotton prices fell. The government tried to boost cotton prices by offering farmers who took 25 percent of their cotton acreage out of production direct support payments up to a specified maximum per farm. 
Q. The government’s program, if successful, will not be a net burden on the budget. Which of the following, if true, is the best basis for an explanation of how this could be so?
  • a)
    Depressed cotton prices meant operating losses for cotton farms, and the government lost revenue from taxes on farm profits.
  • b)
    Cotton production in several counties other than Q declined slightly the year that the support-payment program went into effect in Q. 
  • c)
    The first year that the support-payment program was in effect, cotton acreage in Q was 5% below its level in the base year for the program.
  • d)
    The specified maximum per farm meant that for very large cotton farms the support payments were less per acre for those acres that were withdrawn from production than they were for smaller farms.
  • e)
    Farmers who wished to qualify for support payments could not use the cotton acreage that was withdrawn from production to grow any other crop.
Correct answer is option 'A'. Can you explain this answer?
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Verified Answer
The cotton farms of Country Q became so productive that the market cou...
If the government’s program of support payments to cotton farmers succeeded in raising revenue for the government that would, in the absence of the program, not be raised, this could explain why the program will not be a net burden on the budget. Choice A suggests that the program would raise revenue: by raising the price of cotton, the direct support payments will boost cotton framers’ profits and thereby increase the tax revenues the government receives from cotton farmers. Therefore, A is the best answer.
None of the other choices provides a source of revenue to the government or suggests that savings would be realized in a governmental expense category, so choices B, C, D, and E are all incorrect.
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Most Upvoted Answer
The cotton farms of Country Q became so productive that the market cou...
Explanation:

Depressed Cotton Prices and Operating Losses:
- Depressed cotton prices led to operating losses for cotton farms.
- As a result, the government lost revenue from taxes on farm profits.
- This loss in tax revenue offsets the direct support payments made to farmers under the program.
Therefore, option 'A' provides the best explanation of how the government's program will not be a net burden on the budget.
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Irrespective of the general state of the economy, paying less for the same thing appeals to most consumers, who seem to have an intuitive dislike for inflation. But much as we may like to pay less, a sustained decline in prices, deflation, may not be in our best interests. Deflation, in fact, is considered to be a bigger evil than inflation, and evokes strong action by policymakers who would try everything possible to prop up prices. Deflation often results from a slowdown in which reduction in demand vis--vis supply causes prices to dip. With a sharp decline in prices, consumers tend to postpone purchases in the belief that prices will head further lower. This adds to the pressure on businesses, which in addition to a fall in prices also see an accumulation of inventory. Production cuts are hence resorted to, resulting in factory closures and consequent layoffs or salary cuts. With unemployment increasing, income levels in the economy fall, leading to further cuts in consumer spending and more pressure on prices. A vicious cycle emerges; the cascade effect is felt across sectors; and the economy goes into defeatist mode.To prevent deflations and to tackle the downward spiral caused by them, governments resort to large-scale spending, undertaking massive projects to increase employment, incomes, and prices and pumping in huge sums of money to propel demand. For instance, in the aftermath of the financial market crash in 2008, the US government undertook big-ticket stimulus measures and QE (quantitative easing) to revive the economy.However, not all dips in prices are bad. A fall in prices of goods and services due to technological innovations and increased competition could actually benefit both the consumers and the producers. Such a situation is very different from deflation, which affects prices across the economy on a sustained basis (mainly due to decreasing demand or liquidity problems) and which should indeed be considered a red flag.As per the passage, which of the following would most likely be considered a dip in prices beneficial to both the consumer and the producer?

Irrespective of the general state of the economy, paying less for the same thing appeals to most consumers, who seem to have an intuitive dislike for inflation. But much as we may like to pay less, a sustained decline in prices, deflation, may not be in our best interests. Deflation, in fact, is considered to be a bigger evil than inflation, and evokes strong action by policymakers who would try everything possible to prop up prices. Deflation often results from a slowdown in which reduction in demand vis--vis supply causes prices to dip. With a sharp decline in prices, consumers tend to postpone purchases in the belief that prices will head further lower. This adds to the pressure on businesses, which in addition to a fall in prices also see an accumulation of inventory. Production cuts are hence resorted to, resulting in factory closures and consequent layoffs or salary cuts. With unemployment increasing, income levels in the economy fall, leading to further cuts in consumer spending and more pressure on prices. A vicious cycle emerges; the cascade effect is felt across sectors; and the economy goes into defeatist mode.To prevent deflations and to tackle the downward spiral caused by them, governments resort to large-scale spending, undertaking massive projects to increase employment, incomes, and prices and pumping in huge sums of money to propel demand. For instance, in the aftermath of the financial market crash in 2008, the US government undertook big-ticket stimulus measures and QE (quantitative easing) to revive the economy.However, not all dips in prices are bad. A fall in prices of goods and services due to technological innovations and increased competition could actually benefit both the consumers and the producers. Such a situation is very different from deflation, which affects prices across the economy on a sustained basis (mainly due to decreasing demand or liquidity problems) and which should indeed be considered a red flag.Which of the following is mentioned in the passage?

Irrespective of the general state of the economy, paying less for the same thing appeals to most consumers, who seem to have an intuitive dislike for inflation. But much as we may like to pay less, a sustained decline in prices, deflation, may not be in our best interests. Deflation, in fact, is considered to be a bigger evil than inflation, and evokes strong action by policymakers who would try everything possible to prop up prices. Deflation often results from a slowdown in which reduction in demand vis--vis supply causes prices to dip. With a sharp decline in prices, consumers tend to postpone purchases in the belief that prices will head further lower. This adds to the pressure on businesses, which in addition to a fall in prices also see an accumulation of inventory. Production cuts are hence resorted to, resulting in factory closures and consequent layoffs or salary cuts. With unemployment increasing, income levels in the economy fall, leading to further cuts in consumer spending and more pressure on prices. A vicious cycle emerges; the cascade effect is felt across sectors; and the economy goes into defeatist mode.To prevent deflations and to tackle the downward spiral caused by them, governments resort to large-scale spending, undertaking massive projects to increase employment, incomes, and prices and pumping in huge sums of money to propel demand. For instance, in the aftermath of the financial market crash in 2008, the US government undertook big-ticket stimulus measures and QE (quantitative easing) to revive the economy.However, not all dips in prices are bad. A fall in prices of goods and services due to technological innovations and increased competition could actually benefit both the consumers and the producers. Such a situation is very different from deflation, which affects prices across the economy on a sustained basis (mainly due to decreasing demand or liquidity problems) and which should indeed be considered a red flag.Which of the following statements would the author most likely agree with?

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The cotton farms of Country Q became so productive that the market could not absorb all that they produced. Consequently, cotton prices fell. The government tried to boost cotton prices by offering farmers who took 25 percent of their cotton acreage out of production direct support payments up to a specified maximum per farm.Q. The government’s program, if successful, will not be a net burden on the budget. Which of the following, if true, is the best basis for an explanation of how this could be so?a)Depressed cotton prices meant operating losses for cotton farms, and the government lost revenue from taxes on farm profits.b)Cotton production in several counties other than Q declined slightly the year that the support-payment program went into effect in Q.c)The first year that the support-payment program was in effect, cotton acreage in Q was 5% below its level in the base year for the program.d)The specified maximum per farm meant that for very large cotton farms the support payments were less per acre for those acres that were withdrawn from production than they were for smaller farms.e)Farmers who wished to qualify for support payments could not use the cotton acreage that was withdrawn from production to grow any other crop.Correct answer is option 'A'. Can you explain this answer?
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The cotton farms of Country Q became so productive that the market could not absorb all that they produced. Consequently, cotton prices fell. The government tried to boost cotton prices by offering farmers who took 25 percent of their cotton acreage out of production direct support payments up to a specified maximum per farm.Q. The government’s program, if successful, will not be a net burden on the budget. Which of the following, if true, is the best basis for an explanation of how this could be so?a)Depressed cotton prices meant operating losses for cotton farms, and the government lost revenue from taxes on farm profits.b)Cotton production in several counties other than Q declined slightly the year that the support-payment program went into effect in Q.c)The first year that the support-payment program was in effect, cotton acreage in Q was 5% below its level in the base year for the program.d)The specified maximum per farm meant that for very large cotton farms the support payments were less per acre for those acres that were withdrawn from production than they were for smaller farms.e)Farmers who wished to qualify for support payments could not use the cotton acreage that was withdrawn from production to grow any other crop.Correct answer is option 'A'. Can you explain this answer? for GMAT 2025 is part of GMAT preparation. The Question and answers have been prepared according to the GMAT exam syllabus. Information about The cotton farms of Country Q became so productive that the market could not absorb all that they produced. Consequently, cotton prices fell. The government tried to boost cotton prices by offering farmers who took 25 percent of their cotton acreage out of production direct support payments up to a specified maximum per farm.Q. The government’s program, if successful, will not be a net burden on the budget. Which of the following, if true, is the best basis for an explanation of how this could be so?a)Depressed cotton prices meant operating losses for cotton farms, and the government lost revenue from taxes on farm profits.b)Cotton production in several counties other than Q declined slightly the year that the support-payment program went into effect in Q.c)The first year that the support-payment program was in effect, cotton acreage in Q was 5% below its level in the base year for the program.d)The specified maximum per farm meant that for very large cotton farms the support payments were less per acre for those acres that were withdrawn from production than they were for smaller farms.e)Farmers who wished to qualify for support payments could not use the cotton acreage that was withdrawn from production to grow any other crop.Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for GMAT 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The cotton farms of Country Q became so productive that the market could not absorb all that they produced. Consequently, cotton prices fell. The government tried to boost cotton prices by offering farmers who took 25 percent of their cotton acreage out of production direct support payments up to a specified maximum per farm.Q. The government’s program, if successful, will not be a net burden on the budget. Which of the following, if true, is the best basis for an explanation of how this could be so?a)Depressed cotton prices meant operating losses for cotton farms, and the government lost revenue from taxes on farm profits.b)Cotton production in several counties other than Q declined slightly the year that the support-payment program went into effect in Q.c)The first year that the support-payment program was in effect, cotton acreage in Q was 5% below its level in the base year for the program.d)The specified maximum per farm meant that for very large cotton farms the support payments were less per acre for those acres that were withdrawn from production than they were for smaller farms.e)Farmers who wished to qualify for support payments could not use the cotton acreage that was withdrawn from production to grow any other crop.Correct answer is option 'A'. Can you explain this answer?.
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Which of the following, if true, is the best basis for an explanation of how this could be so?a)Depressed cotton prices meant operating losses for cotton farms, and the government lost revenue from taxes on farm profits.b)Cotton production in several counties other than Q declined slightly the year that the support-payment program went into effect in Q.c)The first year that the support-payment program was in effect, cotton acreage in Q was 5% below its level in the base year for the program.d)The specified maximum per farm meant that for very large cotton farms the support payments were less per acre for those acres that were withdrawn from production than they were for smaller farms.e)Farmers who wished to qualify for support payments could not use the cotton acreage that was withdrawn from production to grow any other crop.Correct answer is option 'A'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of The cotton farms of Country Q became so productive that the market could not absorb all that they produced. Consequently, cotton prices fell. The government tried to boost cotton prices by offering farmers who took 25 percent of their cotton acreage out of production direct support payments up to a specified maximum per farm.Q. The government’s program, if successful, will not be a net burden on the budget. Which of the following, if true, is the best basis for an explanation of how this could be so?a)Depressed cotton prices meant operating losses for cotton farms, and the government lost revenue from taxes on farm profits.b)Cotton production in several counties other than Q declined slightly the year that the support-payment program went into effect in Q.c)The first year that the support-payment program was in effect, cotton acreage in Q was 5% below its level in the base year for the program.d)The specified maximum per farm meant that for very large cotton farms the support payments were less per acre for those acres that were withdrawn from production than they were for smaller farms.e)Farmers who wished to qualify for support payments could not use the cotton acreage that was withdrawn from production to grow any other crop.Correct answer is option 'A'. Can you explain this answer?, a detailed solution for The cotton farms of Country Q became so productive that the market could not absorb all that they produced. Consequently, cotton prices fell. The government tried to boost cotton prices by offering farmers who took 25 percent of their cotton acreage out of production direct support payments up to a specified maximum per farm.Q. The government’s program, if successful, will not be a net burden on the budget. Which of the following, if true, is the best basis for an explanation of how this could be so?a)Depressed cotton prices meant operating losses for cotton farms, and the government lost revenue from taxes on farm profits.b)Cotton production in several counties other than Q declined slightly the year that the support-payment program went into effect in Q.c)The first year that the support-payment program was in effect, cotton acreage in Q was 5% below its level in the base year for the program.d)The specified maximum per farm meant that for very large cotton farms the support payments were less per acre for those acres that were withdrawn from production than they were for smaller farms.e)Farmers who wished to qualify for support payments could not use the cotton acreage that was withdrawn from production to grow any other crop.Correct answer is option 'A'. Can you explain this answer? has been provided alongside types of The cotton farms of Country Q became so productive that the market could not absorb all that they produced. Consequently, cotton prices fell. The government tried to boost cotton prices by offering farmers who took 25 percent of their cotton acreage out of production direct support payments up to a specified maximum per farm.Q. The government’s program, if successful, will not be a net burden on the budget. Which of the following, if true, is the best basis for an explanation of how this could be so?a)Depressed cotton prices meant operating losses for cotton farms, and the government lost revenue from taxes on farm profits.b)Cotton production in several counties other than Q declined slightly the year that the support-payment program went into effect in Q.c)The first year that the support-payment program was in effect, cotton acreage in Q was 5% below its level in the base year for the program.d)The specified maximum per farm meant that for very large cotton farms the support payments were less per acre for those acres that were withdrawn from production than they were for smaller farms.e)Farmers who wished to qualify for support payments could not use the cotton acreage that was withdrawn from production to grow any other crop.Correct answer is option 'A'. Can you explain this answer? theory, EduRev gives you an ample number of questions to practice The cotton farms of Country Q became so productive that the market could not absorb all that they produced. Consequently, cotton prices fell. The government tried to boost cotton prices by offering farmers who took 25 percent of their cotton acreage out of production direct support payments up to a specified maximum per farm.Q. The government’s program, if successful, will not be a net burden on the budget. Which of the following, if true, is the best basis for an explanation of how this could be so?a)Depressed cotton prices meant operating losses for cotton farms, and the government lost revenue from taxes on farm profits.b)Cotton production in several counties other than Q declined slightly the year that the support-payment program went into effect in Q.c)The first year that the support-payment program was in effect, cotton acreage in Q was 5% below its level in the base year for the program.d)The specified maximum per farm meant that for very large cotton farms the support payments were less per acre for those acres that were withdrawn from production than they were for smaller farms.e)Farmers who wished to qualify for support payments could not use the cotton acreage that was withdrawn from production to grow any other crop.Correct answer is option 'A'. Can you explain this answer? tests, examples and also practice GMAT tests.
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