LSAT 138 | Section 1 | Reading Comprehension: Q22

RC Question 22 Explanation

DISCUSSION: We’re told that increased size allows specialization, which offers increasing returns to scale.

This allows monopoly, because bigger businesses become more efficient and can outcompete smaller businesses.

We need to show a reason why that won’t happen. Maybe there are problems to scale as well.

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1. This just shows that there could be multiple local monopolies. Paragraph 3 just said there’s a tendency towards monopoly, not that increasing returns always lead to absolute power for one company.
2. Who cares what workers get paid? We care about market control by a company.
3. This says nothing about specialization. We have no idea why these businesses dominate their industry. Might have nothing to do with returns to scale.
4. This doesn’t prove that returns to scale won’t happen. They just vary across industries.
5. CORRECT. This shows that some costs increase as workers specialize. It decreases returns to scale.