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rschunti
 
 

For several years, per capita expenditure on prescription dr

by rschunti Mon Feb 25, 2008 5:18 am

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?

(A) After price increases were prohibited, drug manufacturers concentrated on producing new medications to replace existing products.

(B) The population of Voronia rose steadily throughout the period.

(C) Improvements in manufacturing processes enabled drug manufacturers to maintain high profit levels on drugs despite the price freeze.

(D) In addition to imposing a price freeze, the government encouraged doctors to prescribe generic versions of common drugs instead of the more expensive brand-name versions.

(E) After price increases were prohibited, some foreign manufacturers of expensive drugs ceased marketing them in Voronia.

Pls explain how to eliminate wrong answer choices and arrive at the correct answer in above GMATprep CR question? Thanks
rschunti
 
 

Pls can you explain

by rschunti Tue Feb 26, 2008 10:53 am

Hi Tutors, Pls explain this one? Thanks
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by mclaren7 Tue Feb 26, 2008 10:09 pm

Hi everyone,

My 2 cents' worth - basically POE:

B - "The population of Voronia rose steadily throughout the period."
--> Doesn't affect per capita expenditure

C - "Improvements in manufacturing processes enabled drug manufacturers to maintain high profit levels on drugs despite the price freeze."
--> price freeze doesn't lead to increase in per capita expenditure.

D - "In addition to imposing a price freeze, the government encouraged doctors to prescribe generic versions of common drugs instead of the more expensive brand-name versions."
--> policy will lead to reduced per capita expenditure

E - "After price increases were prohibited, some foreign manufacturers of expensive drugs ceased marketing them in Voronia."
--> policy will not increase per capita expenditure since the manufacturers will not be spending more money to promote the medications.

It leaves us with A:
"After price increases were prohibited, drug manufacturers concentrated on producing new medications to replace existing products.
--> by developing new patented drugs (which are usually more expensive -- assumption), and if the population finds the new drugs useful (another assumption), yes the per capita expenditure of medication will increase.


Hope my reasoning is correct.
KH
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by StaceyKoprince Tue Mar 04, 2008 1:23 am

"per-capita expenditure" is the total price paid for drugs (price per pill * # of pills) divided by the number of people.

If the per capita expenditure is increasing, either the numerator has to be increasing or the denominator has to be decreasing or both.

So, either the price is increasing, the number of pills is increasing, or the number of people is decreasing (or some combination of the above).

premise: product prices can't be raised (note: by definition, this only addresses existing products; new products not yet introduced do not yet have assigned prices)
--> So I can't raise the price of existing products, but I could introduce more expensive products.

premise: the use of prescription drugs did not increase after the price freeze
--> So the number of pills isn't changing

A) new medications = new price introductions. If these prices are higher than the prices for the old products, then that's how I can increase the numerator of my "per capita expenditure" calculation

B) if this changes anything, it would decrease the per capita expenditure (if the new people didn't take any drugs) - though the more reasonable assumption is that the new people are taking drugs at the same rate as the old people, meaning there's no change in per capita expenditure. Either way, per capita expenditure is not increasing.

C) we're concerned with why the per capita expenditure is still increasing and profit levels don't affect that calculation

D) the government can encourage anything it wants - that doesn't mean it happened. And, anyway, if the gov't were successful in this plan, that should have lowered per capita expenditure, not increased it.

E) if this changes anything, it would decrease the per capita expenditure (people aren't buying as many of the expensive drugs anymore)
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Re: For several years, per capita expenditure on prescription dr

by venkhatapriya Mon Dec 07, 2009 11:44 am

How did you reason out that new medications are being manufactured??

I mean - "In order to curb these dramatic increases, the ministry of health prohibited drug manufacturers from raising any of their products' prices." does not give a hint of new med.s being produced.
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Re: For several years, per capita expenditure on prescription dr

by RonPurewal Tue Jan 05, 2010 5:49 am

venkhatapriya wrote:How did you reason out that new medications are being manufactured??

I mean - "In order to curb these dramatic increases, the ministry of health prohibited drug manufacturers from raising any of their products' prices." does not give a hint of new med.s being produced.


hi - you're using the wrong strategy to answer this question. it appears that you're looking for a statement that can be "reasoned out" FROM the premises, as you'd do for a "find the assumption" or "draw the conclusion" problem.
that's not what is happening in this problem. read the prompt again:
Which of the following, if true...
i.e., whatever the answer choice says, you just assume to be true, and see what sort of effect it will have on the argument.

be sure that you use the right sort of reasoning for each critical reasoning question. don't confuse different question types!

--

the reason why (a) is correct is that new drugs are not subject to the price controls (since there is no current price at which they can be frozen - the price controls only apply to drugs that already have a price). therefore, these new drugs could indeed account for increased costs, even if consumers are not purchasing any more drugs than they did before.
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Re: For several years, per capita expenditure on prescription dr

by purduesr Wed Jan 27, 2010 11:57 pm

RonPurewal wrote:
venkhatapriya wrote:How did you reason out that new medications are being manufactured??

I mean - "In order to curb these dramatic increases, the ministry of health prohibited drug manufacturers from raising any of their products' prices." does not give a hint of new med.s being produced.


hi - you're using the wrong strategy to answer this question. it appears that you're looking for a statement that can be "reasoned out" FROM the premises, as you'd do for a "find the assumption" or "draw the conclusion" problem.
that's not what is happening in this problem. read the prompt again:
Which of the following, if true...
i.e., whatever the answer choice says, you just assume to be true, and see what sort of effect it will have on the argument.

be sure that you use the right sort of reasoning for each critical reasoning question. don't confuse different question types!

--

the reason why (a) is correct is that new drugs are not subject to the price controls (since there is no current price at which they can be frozen - the price controls only apply to drugs that already have a price). therefore, these new drugs could indeed account for increased costs, even if consumers are not purchasing any more drugs than they did before.



Hi Ron-

While I understand why A is correct, how are we supposed to assume from choice A that new products are more expensive than existing products? I thought that in CR, you are only supposed to infer using what we know. I just don't see how we make such assumption in choice A since nowhere in the argument do we get a clue that new products are more expensive.

Could you please clarify this?
thanks
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Re: For several years, per capita expenditure on prescription dr

by RonPurewal Wed Feb 17, 2010 7:56 am

purduesr wrote:Hi Ron-

While I understand why A is correct, how are we supposed to assume from choice A that new products are more expensive than existing products? I thought that in CR, you are only supposed to infer using what we know. I just don't see how we make such assumption in choice A since nowhere in the argument do we get a clue that new products are more expensive.

Could you please clarify this?
thanks


note the question stem: "Which of the following, if true, most helps to explain ..."
what this basically means is that the correct answer will open up new avenues of explanation. it's not necessarily going to provide you with every single statement that you need -- in most cases, that would make the problem far too easy -- but it will provide a clear, new avenue through which the situation may be explained.

here's another example:
HELP EXPLAIN THE SITUATION --> james and i both paid full price at a buffet. james bought more items at the buffet than i did, but my total bill was higher than james's.
in this situation, if you have an answer choice that said "not all items at the buffet are sold for the same price", that would be good enough to be the correct answer. you would not need a spoon-feeding answer choice such as "my individual items were more expensive than james's individual items".
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Re: For several years, per capita expenditure on prescription dr

by sangeethmani Mon Aug 16, 2010 1:11 pm

I understand with A you are assuming that the new products are more expensive. But my doubt is that the argument clearly states that the price of the products will not be increased (be it new or old, this makes a very general assumption nor does the answer choice say that the new products are more expensive for me to accept that they are more expensive). So I am just perplexed about the answer choice.

Please help.
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Re: For several years, per capita expenditure on prescription dr

by gokul_nair1984 Mon Aug 16, 2010 2:01 pm

Price rise for existing products has been prohibited by the Govt. In order to realise better profits,the manufacturers could always look to invent new medicines, patent them and price them as per their will and that is exactly what they did (As per 'A')

"In order to curb these dramatic increases, the ministry of health prohibited drug manufacturers from raising any of their products' prices."...Here the Govt is talking about existing prices and there is no inference about new inventions.
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Re: For several years, per capita expenditure on prescription dr

by mschwrtz Sat Sep 18, 2010 2:47 am

Yep, Gokul is right.

The ministry of health prohibited drug manufacturers from raising any of their products' prices.
That couldn't apply to products that didn't exist at the time of the prohibition, because such products didn't have prices to freeze.
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Re:

by aagar2003 Sun Aug 07, 2011 5:47 am

StaceyKoprince wrote:"per-capita expenditure" is the total price paid for drugs (price per pill * # of pills) divided by the number of people.

Love your explanation.
Just one thing to be corrected on the definition of per-capita expenditure.
It should be the amount spent by a person living in Voronia on prescription drugs
= Total Price paid for the drugs per person
= (Price per pill) * (#pills per person)

Either of the following can increase
the Price per Pill or
the number of pills consumed by/prescribed for person
.......
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Re: Re:

by RonPurewal Fri Aug 12, 2011 5:34 am

aagar2003 wrote:
StaceyKoprince wrote:"per-capita expenditure" is the total price paid for drugs (price per pill * # of pills) divided by the number of people.

Love your explanation.
Just one thing to be corrected on the definition of per-capita expenditure.
It should be the amount spent by a person living in Voronia on prescription drugs
= Total Price paid for the drugs per person
= (Price per pill) * (#pills per person)

Either of the following can increase
the Price per Pill or
the number of pills consumed by/prescribed for person
.......


this is already a logical consequence of what stacey wrote above.

she wrote:
So, either the price is increasing, the number of pills is increasing, or the number of people is decreasing (or some combination of the above).

you haven't listed anything that is not covered under the cases that she has listed here.
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Re: For several years, per capita expenditure on prescription dr

by parveenjain Mon Nov 28, 2011 11:20 am

Just thinking why not the E can not be correct.
By all chances, expensive drug maker stopped marketing them in Voronia.So it can also lead consumers to buy these medicines from some other place where these can be even more expensive.Just with the line of reasoning of A even E can be deduced.
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Re: For several years, per capita expenditure on prescription dr

by RonPurewal Fri Dec 09, 2011 5:43 am

parveenjain wrote:Just thinking why not the E can not be correct.


choice (e) most likely helps the ministry achieve its goal.
that choice specifically says that companies stopped selling certain expensive medicines in the country; that action, mathematically, should reduce average drug costs.

your problem is here:
So it can also lead consumers to buy these medicines from some other place where these can be even more expensive.


you can't do this. i.e., you can't make up "facts" at random, and then build an argument on them!

there is no reason to assume that either of these things is true, much less to build a whole argument on them.
i.e., we don't know whether consumers can buy the drugs from another country; it's just as reasonable to assume that they can't as to assume that they can.
also, we don't know that the drugs are more expensive in other countries; it would be just as reasonable to assume that they are less expensive in other countries.

basically, the short version of my point here: if your argument contains "might" or "could" or "possibly", then STOP -- it's not a valid tool for strengthening or weakening.
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