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Question
Emergingco, a new corporation with limited funds, has been clearing large sections of the tropical Amazon forest for building solar power plants. This practice continues even though greater profits can be made from organic argo-forestry, which does not destroy the forest, than from solar plant building, which does destroy the forest.
Which of the following, if true, most helps to explain why Emergingco has been pursuing the less profitable of two economic activities mentioned above? Enter the correct option in the space provided.
A. The soil of the Amazon forest is very suitable for providing foundations for building a solar power plant.
B. Emergingco management has decades of experience in building and running solar power plants but they do not have any experience in running an organic agro-forestry operation.
C. In Amazon tropical forests, profits made from solar power generation are more heavily taxed than profits made from any other industry.
D. Some of the organic produce from the operations in Amazon rainforest are mandated by the local government to be provided to the marginalized sections of the society. ___
Which of the following, if true, most helps to explain why Emergingco has been pursuing the less profitable of two economic activities mentioned above? Enter the correct option in the space provided.
A. The soil of the Amazon forest is very suitable for providing foundations for building a solar power plant.
B. Emergingco management has decades of experience in building and running solar power plants but they do not have any experience in running an organic agro-forestry operation.
C. In Amazon tropical forests, profits made from solar power generation are more heavily taxed than profits made from any other industry.
D. Some of the organic produce from the operations in Amazon rainforest are mandated by the local government to be provided to the marginalized sections of the society.
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Solution
Situation: Emergingco is a new corporation with limited funds. It has been clearing large sections of the tropical Amazon forest for building a solar power plant, even though running an organic agro-forestry operation would be more profitable.
Reasoning: What would explain why Emergingco is clearing sections of the rain forest for building a solar power plant, even though farming would be more profitable? Because it has limited funds, if farming has much higher start-up costs, Emergingco might not have enough money to start farming operations. If solar plant construction has much lower start-up costs than farming, Emergingco might be able to afford such an operation. Also, the management of a cash strapped company will be careful in picking its battles. If they have a lot of experience in running a business, they will invest their money in a business that they understand rather than risking it in an unknown venture. A bird in hand is worth two in the bush.
A.This statement gives a reason why solar power plant construction in the Amazon might be more profitable than one might otherwise think it would be. However, we already know from the passage that organic farming would be more profitable than the solar business. So, this answer choice does not help explain why solar business might be preferable to farming.
B.Correct: The management of a company that has limited funds will not risk venturing into a space that it knows nothing about even though the profits may be higher than the area they have experience in.
C.This statement makes what needs to be explained harder to understand, for it indicates that solar business in the Amazon might be less profitable than one would otherwise think.
D.While this statement indicates that organic farming might somewhat less profitable, it does not convincingly state why it should be ruled out in the favor of solar plants. The correct answer is B
Reasoning: What would explain why Emergingco is clearing sections of the rain forest for building a solar power plant, even though farming would be more profitable? Because it has limited funds, if farming has much higher start-up costs, Emergingco might not have enough money to start farming operations. If solar plant construction has much lower start-up costs than farming, Emergingco might be able to afford such an operation. Also, the management of a cash strapped company will be careful in picking its battles. If they have a lot of experience in running a business, they will invest their money in a business that they understand rather than risking it in an unknown venture. A bird in hand is worth two in the bush.
A.This statement gives a reason why solar power plant construction in the Amazon might be more profitable than one might otherwise think it would be. However, we already know from the passage that organic farming would be more profitable than the solar business. So, this answer choice does not help explain why solar business might be preferable to farming.
B.Correct: The management of a company that has limited funds will not risk venturing into a space that it knows nothing about even though the profits may be higher than the area they have experience in.
C.This statement makes what needs to be explained harder to understand, for it indicates that solar business in the Amazon might be less profitable than one would otherwise think.
D.While this statement indicates that organic farming might somewhat less profitable, it does not convincingly state why it should be ruled out in the favor of solar plants.
The correct answer is B
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