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. 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?

Question

Examsnet · Accepted Answer

Correct Answer is : Depressed cotton prices meant operating losses for cotton farms, and the government lost revenue from taxes on farm profits.

GMAT Verbal Reasoning Practice Test 6