149. 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?
(A) Depressed cotton prices meant operating losses for cotton farms, and the government lost revenue from taxes on farm profits.
(B) Cotton production in several counties other than Q declined slightly the year that the support-payment program went into effect in Q.
(C) The first year that the support-payment program was in effect, cotton acreage in Q was 5% below its level in the base year for the program.
(D) The specified maximum per farm meant that for very large cotton farms the support payments were less per acre for those acres that were withdrawn from production than they were for smaller farms. A
(E) Farmers who wished to qualify for support payments could not use the cotton acreage that was withdrawn from production to grow any other crop.
149.
If the government’s program of support payments to cotton farmers succeeded in raising revenue for the government that would, in the absence of the program, not be raised, this could explain why the program will not be a net burden on the budget. Choice A suggests that the program would raise revenue: by raising the price of cotton, the direct support payments will boost cotton framers’ profits and thereby increase the tax revenues the government receives from cotton farmers. Therefore, A is the best answer.
None of the other choices provides a source of revenue to the government or suggests that savings would be realized in a governmental expense category, so choices B, C, D, and E are all incorrect.
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