Critical Analysis & Reasoning Skills Practice Questions: 19 | Critical Analysis & Reasoning Skills for MCAT PDF Download

Tulipomania, with its sheer lunacy and disastrous consequences, stands as one of the most remarkable economic swings in history. In 1593, a botanist brought tulip samples from Constantinople to Holland, intending to study their medicinal properties. However, his garden was looted, and the stolen bulbs marked the beginning of the tulip trade in Holland. The vibrant and exotic tulips quickly became highly coveted by wealthy Dutch homeowners, leading to the cultivation of small plots of tulips in many prestigious houses. An introduced mosaic virus weakened the plant stock but also caused captivating streaks of color on the petals, making the plants even more desirable and fueling a rapid increase in prices.

By 1635, the tulip market had reached a frenzy, with buyers speculating on tulips by purchasing promissory notes while the bulbs were still in the ground. Prices of the most popular damaged plants soared overnight, and buyers engaged in speculative purchases, hoping to sell at a profit in the spring. Tulips had inherent rarity due to their slow growth from seed and the limited number of bulb clones produced each year, which helped maintain their value even with the introduction of new varieties. The tulip craze reached such heights that ordinary citizens were selling their possessions, including valuable assets like land and houses, for a single bulb, some of which were worth thousands of dollars in today's currency.

Despite the wild nature of the tulip market, all transactions occurred outside of the established Stock Exchange in Amsterdam. It was a people's exchange, with sales often taking place at auctions, pubs, or town squares. However, as is often the case with overly optimistic profit potential, tulipomania was destined to end in disaster. In February 1637, at a bulb auction in Haarlem, the market collapsed when no one agreed to pay the inflated prices. Panic ensued, causing prices to plummet, bulb dealers to renege on contracts, and the government to intervene in an attempt to rescue the country's economy. Eventually, a panel of judges declared tulip investments as gambling and unrecoverable. Holland descended into a severe economic depression that lasted for years and eventually spread to the rest of Europe.
Q.1. What led to the increased desirability of tulips during tulipomania?
(a) The introduction of new tulip varieties on the market.
(b) The cultivation of tulips in prestigious Dutch houses.
(c) The discovery of their medicinal properties by a botanist.
(d) The appearance of vibrant and exotic colors caused by a mosaic virus.

Correct Answer is Option (d)
The passage states that a mosaic virus attacked the introduced tulip species, weakening the plants but also causing streaks of color on the petals, making them more desirable. Therefore, the correct answer is D.

Q.2. Why did the value of tulips remain high despite their inherent rarity?
(a) The scarcity of tulips made them highly sought after.
(b) New varieties of tulips constantly entered the market.
(c) The Dutch government intervened to control prices.
(d) Tulips were used as a form of currency.

Correct Answer is Option (a)
The passage mentions that tulips have inherent rarity because they take years to grow from seed and produce only one or two bulb clones annually. This scarcity helped maintain their value, even with the introduction of new varieties. Therefore, the correct answer is A.

Q.3. How did the tulip market transactions differ from the established Stock Exchange in Amsterdam?
(a) Tulip sales were transacted exclusively at auctions.
(b) The tulip market was governed by the Dutch government.
(c) Tulip transactions took place outside of formal exchanges.
(d) The tulip market allowed speculative investments.

Correct Answer is Option (c)
The passage states that the tulip market was transacted entirely outside of the established Stock Exchange in Amsterdam. Sales took place at auctions, pubs, or town squares. Therefore, the correct answer is C.

Q.4. What triggered the collapse of the tulip market?
(a) The introduction of new tulip varieties with lower prices.
(b) A sudden decrease in demand for tulips among wealthy homeowners.
(c) The refusal of buyers to pay the inflated prices at a bulb auction.
(d) The intervention of the Dutch government to stabilize prices.

Correct Answer is Option (c)
The passage states that the tulip market collapsed when no one agreed to pay the inflated prices at a bulb auction in Haarlem. This event triggered panic, causing prices to plummet. Therefore, the correct answer is C.

Q.5. What were the consequences of tulipomania?
(a) A rapid increase in tulip cultivation in Holland.
(b) The emergence of a thriving tulip trade in Europe.
(c) A severe economic depression in Holland and Europe.
(d) The establishment of the Stock Exchange in Amsterdam.

Correct Answer is Option (c)
The passage states that Holland fell into a severe economic depression that lasted for years as a result of tulipomania. This depression eventually spread to the rest of Europe. Therefore, the correct answer is C.