PrepTest 134, Section 2, Question 12
Perry: Worker-owned businesses require workers to spend time(53 more words not shown)
Which one of the following,(7 more words not shown)
- ABusinesses with the(18 more words not shown)
- BLenders who specialize(12 more words not shown)
- CInvestor-owned businesses are(10 more words not shown)
- DWorker-owned businesses have(13 more words not shown)
- EIn most worker-owned(15 more words not shown)
Reading the argument
An inefficiency can create risk. That doesn't mean every worker-owned business is a bad loan.
Perry points to time spent making management decisions and choosing investments. Those tasks don't directly produce the goods being sold, but someone still has to do them. Answering a business email may not immediately bring in money, yet ignoring it could cost the business. Investor-owned companies also need people making decisions.
The workers may wear several hats rather than having separate accounting, marketing, and production departments. That could create inefficiencies. But could those businesses still be profitable? Could some investor-owned businesses be risky too? The word “can” leaves those questions open.
What we’re looking for
Perry moves from a possible problem to telling risk-conscious lenders to avoid the entire category. I'd expect a weakener to show why worker ownership needn't make a business a poor lending risk: perhaps many of these businesses are profitable, or some other feature offsets the inefficiencies. We need information about the business's ability to succeed and repay a loan, not just about who usually lends to it.
Working the answers
- A
Failing to use someone's full potential might be a disadvantage of an extensive division of labor. But A only says this sometimes happens and doesn't tell us how much it affects profitability or loan repayment. Those businesses could underuse a versatile employee and still be excellent lending risks. This is too limited and indirect to answer Perry's concern as well as E does.
- B
Receiving loans from specialists in high-risk lending doesn't show that worker-owned businesses are less risky than Perry suggests. It might fit Perry's view, though it doesn't prove that view. The source of the loans gives us no compensating advantage that makes the businesses more likely to repay.
- C
Which businesses are more likely to receive start-up loans isn't the same as which loans are likely to be repaid. Different approval rates could have several explanations. Without information about the risk, C doesn't undermine Perry's recommendation.
- D
This describes where worker-owned businesses traditionally get their loans. A cooperative lender could make safe loans or risky ones. Knowing its organizational structure doesn't show that the borrowers overcome the inefficiencies Perry identifies.
- ECorrect
The workers make up for inefficiency by putting in longer hours. Think of a worker who spends part of the day handling management tasks, then works extra hours to complete the production work. The management time needn't leave the business with less output overall.
This accepts the inefficiencies but supplies a reason they may not produce the low profitability Perry fears. It doesn't guarantee repayment of every loan. It undermines the proposed blanket avoidance by showing that most of these businesses compensate for the very disadvantage on which the warning relies.
More Weaken questions
Learn the LSAT our way
Our platform drills Weaken questions at your level and adjusts as you improve.