Loading...
In an effort to lower the average price over the long term for electricity generated from wind turbines, the national government of Mongrove plans to offer large, temporary tax reductions to companies that sell wind-generated electricity, which will allow those companies to lower prices to competitive levels and thus increase the amount of wind-generated electricity they sell. An economist argues that this approach will not yield the desired long-term result. She claims that the tax reductions will keep prices for wind-generated electricity artificially low, and thus that prices will return to their previous levels as soon as the taxes do.
Which of the following information would be most valuable to know in evaluating the economist's argument?
| Text from Passage | Analysis |
| In an effort to lower the average price over the long term for electricity generated from wind turbines, the national government of Mongrove plans to offer large, temporary tax reductions to companies that sell wind-generated electricity |
|
| which will allow those companies to lower prices to competitive levels and thus increase the amount of wind-generated electricity they sell |
|
| An economist argues that this approach will not yield the desired long-term result |
|
| She claims that the tax reductions will keep prices for wind-generated electricity artificially low |
|
| and thus that prices will return to their previous levels as soon as the taxes do |
|
We start with the government's plan and reasoning, then get the economist's disagreement and her counter-reasoning. The flow moves from proposal to opposition.
The economist's conclusion is that Mongrove's tax reduction approach won't achieve long-term lower wind electricity prices.
The economist uses a cause-and-effect argument: tax reductions create artificial price drops (not real competitiveness), so when taxes return, prices will bounce back to original high levels, defeating the long-term goal.
Evaluate - We need to find information that would help us determine whether the economist's argument is strong or weak. The economist claims that temporary tax breaks won't create lasting price reductions because prices will bounce back to original levels once the tax incentives end.
The economist makes a specific claim about timing and causation - that prices will return to 'previous levels' as soon as taxes return to normal levels. This is a precise prediction about what happens when the temporary policy ends.
For evaluate questions, we need to think of key assumptions the economist is making and create scenarios that would either validate or invalidate her prediction. We should focus on what could make wind electricity prices stay low permanently versus what would cause them to snap back up after tax breaks end.