GMAT Critical Reasoning
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.
Correct Answer: A