Economist: No Economic System that is Centrally Planned can Efficiently Allocate Resources

Question: Economist: No economic system that is centrally planned can efficiently allocate resources, and efficient allocation of resources is a necessary condition for achieving a national debt of less than 5 percent of Gross Domestic Product (GDP). It follows that any nation with a centrally planned economy has a national debt that is at least 5 percent of GDP.

The pattern of reasoning exhibited by the economist’s argument is most similar to that exhibited by which one of the following?

(A) Not all mammals are without wings, because bats are mammals and bats have wings.
(B) All of the rural districts are free of major air pollution problems because such problems occur only where there is a large concentration of automobiles, and there are no such places in the rural districts.
(C) All of the ungulates are herbivores, and most herbivores would not attack a human being. It follows that any animal that would attack a human being is unlikely to be ungulate.
(D) All rock stars who are famous have their own record companies, and all rock stars with their own record companies receive company profits over and above their regular royalties. This implies that receiving large regular royalties is a
necessary condition of being a famous rock star.
(E) Every mutual fund manager knows someone who trades on inside information, and no one who trades on inside information is unknown to every mutual fund manager. One must conclude that no mutual fund manager is unknown to every one who trades on inside information.

Answer: B

Explanation:

GMAT critical reasoning tests the reasoning, logical and analytical thinking abilities of the candidate. The candidate has to deduce the correct option by finding the logically correct argument or by eliminating the irrelevant arguments.

The statement states - Economist: No economic system that is centrally planned can efficiently allocate resources, and efficient allocation of resources is a necessary condition for achieving a national debt of less than 5 percent of Gross Domestic Product (GDP). It follows that any nation with a centrally planned economy has a national debt that is at least 5 percent of GDP.
The pattern of reasoning exhibited by the economist’s argument is most similar to that exhibited by which one of the following?
In any such "Mimic the reasoning" type of question, it helps to break the stimulus down into various parts, assign variables to each part and examine the relationship between all of them. Performing this exercise for the given stimulus:
Centrally planned economic system (X) -> Not efficiently allocate resources (Not Y)
Efficient allocation of resources is necessary (Y is a must) -> debt of less than 5 percent of GDP (Z)

Therefore, centrally planned economic system (X) -> debt is at least 5 percent of GDP (Not Z)

Now let us examine the options and see where such a structure is replicated:

(A) Bats (X) --> Have wings (Y)
No wings (Not Y) --> Not necessarily not a mammal (May be, say, Z)
Clearly, this doesn't replicate the structure of the argument.

(B) Rural districts (X) --> No large concentration of automobiles (Not Y)
Only where there is a large concentration of automobiles (Y is a must) --> Such problems ie; air pollution (Z)
Therefore, rural districts (X) --> No air pollution (Not Z)
As we can see, this exactly replicates the structure of the stimulus and hence is the correct answer.

(C) Ungulates (X) --> Herbivores (Y)
Most herbivores (if Y, most likely) --> Would not attack a human being (Not Z)
Therefore, if any animal attacks a human being (if Z) --> Unlikely to be ungulate (most likely not X)
Clearly, this doesn't replicate the structure of the argument.

(D) Famous and rock star (X & Y) --> Own record company (Z)
Rock stars with their own record companies (X & Z) --> Receive company profits over and above their regular royalties (P)
Therefore, receiving large regular royalties is a necessary condition (P is necessary) --> rock star (X)
Clearly, this doesn't replicate the structure of the argument.

(E) Mutual fund manager knows (X knows) --> Someone who trades on inside information (Y)
No one who trades on inside information (Not Y) --> Unknown to every mutual fund manager (X not know)
Therefore, no mutual fund manager (Not X) --> Unknown to everyone who trades on inside information (Y not know)
Clearly, this doesn't replicate the structure of the argument.

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