For several years, per capita expenditure on prescription drugs in Voronia rose by fifteen percent or more annually. In order...
GMAT Critical Reasoning : (CR) Questions
For several years, per capita expenditure on prescription drugs in Voronia rose by fifteen percent or more annually. In order to curb these dramatic increases, the ministry of health prohibited drug manufacturers from raising any of their products' prices. Even though use of prescription drugs did not expand after this price freeze, per capita expenditure for prescription drugs continued to increase by a substantial percentage each year.
Which of the following, if true, most helps to explain why the ministry's action did not achieve its goal?
Passage Analysis:
| Text from Passage | Analysis |
| For several years, per capita expenditure on prescription drugs in Voronia rose by fifteen percent or more annually. |
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| In order to curb these dramatic increases, the ministry of health prohibited drug manufacturers from raising any of their products' prices. |
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| Even though use of prescription drugs did not expand after this price freeze, per capita expenditure for prescription drugs continued to increase by a substantial percentage each year. |
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Argument Flow:
We start with a problem (rising drug costs), then see a government solution (price freeze), and finally discover the solution didn't work (costs kept rising anyway). This creates a puzzle that needs explaining.
Main Conclusion:
There is no explicit conclusion in this argument - it's a paradox that presents a puzzling situation where the ministry's price freeze failed to stop rising drug expenditures.
Logical Structure:
This isn't a traditional argument with premises supporting a conclusion. Instead, it's a paradoxical situation: if prices are frozen and usage didn't increase, spending per person should have stayed flat or decreased, but it kept rising. The passage sets up a mystery that requires explanation.
Prethinking:
Question type:
Paradox - We need to explain why the ministry's price freeze didn't work even though drug usage didn't increase. This is a classic 'explain the surprising result' question where we need to find what could cause spending to rise despite frozen prices and stable usage.
Precision of Claims
The claims are very specific: prices were frozen (no increases allowed), drug usage didn't expand, but per capita spending still rose substantially. We need to respect all these facts and find what else could drive spending up.
Strategy
For paradox questions, we need to find scenarios that explain the seemingly contradictory outcome. The puzzle is: frozen prices + same usage = should mean stable spending, but spending actually kept rising. We need to think about what factors besides price increases and usage expansion could drive up per capita drug spending.
This directly explains the paradox. If drug manufacturers can't raise prices on existing drugs, they would logically focus on developing new medications that can be priced higher from the start. When these new, more expensive drugs replace older ones in the market, per capita spending increases even though prices are frozen and usage hasn't expanded. The price freeze only applied to existing products, not new ones entering the market.
Population growth doesn't explain this paradox at all. We're told that per capita expenditure increased - this already accounts for population changes since it's a per-person measurement. Whether the population is 1 million or 10 million, if spending per person goes up, population size is irrelevant to explaining why the price freeze failed.
This talks about manufacturers maintaining profits despite the price freeze, but profit levels don't affect consumer spending. Whether manufacturers make high or low profits on their drugs doesn't change how much consumers spend. This choice confuses the manufacturer's financial situation with consumer expenditure patterns.
Encouraging generic drug prescriptions would actually decrease per capita spending since generics are cheaper than brand-name drugs. This choice suggests a policy that would work in the opposite direction of what we need to explain - it would help reduce spending, not explain why spending continued to rise.
Foreign manufacturers leaving the market would typically reduce spending since it removes expensive options from the market. With fewer expensive foreign drugs available, we'd expect average spending to decrease, not increase. This choice also works against the trend we need to explain.