LSAT 134 | Section 2 | Logical Reasoning: Q12

LR Question 12 Explanation

QUESTION TEXT: Perry: Worker-owned businesses require workers to spend time …

QUESTION TYPE: Weaken

CONCLUSION: Lenders who want to reduce risk shouldn’t make loans to worker-owned businesses.

REASONING:

• They spend time on management tasks instead of productive work.
• They also have less specialization than investor-owned businesses.
• These inefficiencies can reduce profitability and increase risk to lenders.

ANALYSIS: Perry’s reasoning can be diagrammed as a chain:

Less efficient → lower profits → riskier borrowers → lenders should avoid them.

Lower profits meaning more risk and therefore avoiding is pretty solid. That’s how economics works.

The most susceptible place to weaken is the first part (less efficient → lower profits). If the supposed inefficiencies don’t actually reduce profitability, then the rest of the argument also falls apart.

So if the inefficiencies are somehow offset, then lenders don’t necessarily face greater risk.

___________

1. This points out that investor-owned businesses also have an inefficiency. But Perry never claims investor-owned businesses are perfectly efficient. Showing they have one disadvantage doesn’t show worker-owned businesses are safe investments.
2. The fact that high-risk lenders often lend to worker-owned businesses doesn’t tell us whether those businesses are actually high risk. It just tells us who lends to them.
3. This tells us worker-owned businesses are less likely to receive start-up loans. It doesn’t tell us whether they actually repay loans successfully or whether they’re risky borrowers.
4. This only tells us where worker-owned businesses get their loans. Even if they usually borrow from cooperative lenders, they could still be risky businesses.
5. CORRECT. If workers compensate for the inefficiencies by working longer hours, then those inefficiencies may not reduce productivity or profitability after all. If the businesses remain profitable despite their inefficiencies, there’s much less reason to think lenders should avoid making loans to them.