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Difficulty: Very hardCompleting the Passage Logically

Historically, municipal water utilities facing severe drought conditions have implemented tier-based pricing structures that dramatically increase per-gallon rates for high-volume consumers. Economists reasoned that raising the marginal cost of excess usage would compel households to reduce discretionary consumption, such as lawn irrigation. Recent empirical data, however, reveals that in municipalities where tier-based pricing was instituted alongside subsidies for water-efficient household appliances, overall water consumption decreased significantly less than in municipalities that implemented tier-based pricing alone. This disparity occurs because the financial savings produced by the subsidized appliances effectively buffer households against the higher marginal cost of discretionary water use. Therefore, a municipal policy intended to maximize water conservation by combining tier pricing with appliance subsidies will likely prove ineffective unless ________.

Which of the following most logically completes the passage?

  1. the marginal rates for high-volume water consumption are set high enough to outweigh the monetary savings generated by the appliance subsidiesAnswer
  2. B
    the municipality restricts appliance subsidies exclusively to low-income households that are statistically less likely to maintain large residential lawns
  3. C
    the financial savings generated by the water-efficient appliances are returned directly to consumers in the form of annual utility rebates
  4. D
    discretionary water consumption such as lawn irrigation accounts for the vast majority of total municipal water demand during drought periods
  5. E
    households receiving appliance subsidies eliminate non-discretionary indoor water waste entirely before increasing discretionary outdoor use

Answer

The correct completion is that the marginal rates for high-volume water consumption are set high enough to outweigh the monetary savings generated by the appliance subsidies.
The passage establishes that the combined policy fails because the monetary savings from appliance subsidies offset the higher marginal rates of tier-based pricing, eliminating the economic disincentive to conserve discretionary water. To prevent this failure (i.e. 'unless...'), the financial penalty imposed by the high-volume marginal rate must exceed the savings gained from the appliance subsidies, ensuring that excess water usage remains net-costly to the household.

Step-by-Step Solution

1
Analyze the core argument structure and premises in the stimulus.
Premise 1: Tiered pricing increases marginal costs to reduce discretionary water use. Premise 2: Adding appliance subsidies resulted in LESS overall water reduction than tiered pricing alone. Premise 3 (Mechanism): Financial savings from subsidized appliances offset the higher cost of discretionary water use.
Understanding the causal conflict is necessary to identify what missing condition restores the policy's effectiveness.
2
Identify the logical gap created by the conclusion stem ending in 'unless'.
The passage asserts the combined policy will fail 'unless' a specific condition neutralizes the offsetting mechanism.
The word 'unless' introduces a necessary condition to prevent the stated failure.
3
Synthesize the mechanism to find the necessary condition.
Since failure occurs because appliance savings >= price increase penalty, success requires price increase penalty > appliance savings.
If the marginal rate penalty is greater than the financial savings from the subsidy, households will no longer have a net buffer to finance discretionary water use.

Key Concept

Completing the Passage via Paradox Neutralization / Mathematical Balance in Arguments
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Completing the Passage Logically

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