LSAT 134 – Section 2 – Question 12

LSAT 134 - Section 2 - Question 12

October 2011

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Question
QuickView		 Type Tags Answer
Choices		 Curve Question
Difficulty		 Psg/Game/S
Difficulty		 Explanation
PT134 S2 Q12
+LR
+Exp
Weaken +Weak
A
8%
157
B
5%
154
C
1%
152
D
3%
153
E
84%
164
138
147
155
 +Medium 146.032 +SubsectionMedium

Perry: Worker-owned businesses require workers to spend time on management decision-making and investment strategy, tasks that are not directly productive. Also, such businesses have less extensive divisions of labor than do investor-owned businesses. Such inefficiencies can lead to low profitability, and thus increase the risk for lenders. Therefore, lenders seeking to reduce their risk should not make loans to worker-owned businesses.

Summarize Argument
The author concludes that risk-averse lenders shouldn’t lend to worker-owned businesses. This is because worker-owned businesses have inefficiencies that can lead to low profits.

Notable Assumptions
Perry assumes that these inefficiencies aren’t offset by some feature of worker-owned businesses that goes unmentioned. The fact that worker-owned businesses continue to exist, despite their inherent inefficiencies, suggests there’s some hidden factor here that Perry has neglected.

A
Businesses with the most extensive divisions of labor sometimes fail to make the fullest use of their most versatile employees’ potential.
This supports Perry’s argument. Worker-owned business have extensive divisions of labor, so this points to yet another inefficiency.
B
Lenders who specialize in high-risk loans are the largest source of loans for worker-owned businesses.
Perry concludes what risk-averse lenders should do. We don’t care about ones who specialize in high-risk loans.
C
Investor-owned businesses are more likely than worker-owned businesses are to receive start-up loans.
Like (A), this supports Perry’s argument. Worker-owned businesses are less likely than investor-owned business to receive the necessary funding to grow. Thus, these businesses likely aren’t a great investment for risk-averse investors.
D
Worker-owned businesses have traditionally obtained loans from cooperative lending institutions established by coalitions of worker-owned businesses.
This tells us how worker-owned businesses are usually funded. We need to know why risk-averse lenders should actually be interested in worker-owned businesses.
E
In most worker-owned businesses, workers compensate for inefficiencies by working longer hours than do workers in investor-owned businesses.
Worker-owed businesses mitigate their inherent inefficiencies through hard work. Thus, worker-owed businesses might not actually be any riskier than other businesses.

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LSAT PrepTest 134 Explanations

Section 1 - Logical Reasoning

Section 2 - Logical Reasoning

Section 3 - Logical Reasoning

Section 4 - Reading Comprehension

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