Canadian wheat farmers produced so much wheat over the last season that wheat prices plummeted. The government tried to boost wheat prices by offering farmers who agreed not to harvest 20 percent of their wheat field compensation up to a specified maximum per farm. The Canadian 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 :  If prices were allowed to remain low, the farms would be operating at a loss, causing the government to lose tax revenue on farm profits.

GMAT Verbal Reasoning Practice Test 1