LSAT 23 | Section 3 | Logical Reasoning: Q2

LR Question 2 Explanation

QUESTION TEXT: Owners of deeply indebted and chronically unprofitable…

QUESTION TYPE: Paradox

PARADOX: Some loans to indebted small businesses provide good returns in the first year. This is surprising because the loans are used to pay off debts and not to expand sales.

ANALYSIS: Have you got debts? Imagine how your life would become easier if someone paid them. It would free up time and money for you. You might be able to use that new time and money to pay back the person who paid your debts for you.

___________

1. Reinvesting your returns on a bad loan generally doesn’t help you earn much money.
2. This explains why the loans aren’t enough to expand production. More money would be needed.
3. CORRECT. This makes sense. The new loans helps the company reduce expenses, and that leaves more profits for the owners.
4. This explains why most people don’t lend money to the companies, but it doesn’t tell us why loans are profitable.
5. This answer just mushes together a couple of terms from the stimulus to try and confuse you. It hardly means anything. The question is about why loans do well, not why and whether it makes sense to expand production.

Recap: The question begins with “Owners of deeply indebted and chronically unprofitable”. It is a Paradox question. Learn more about LSAT Paradox questions in our guide to LSAT Logical Reasoning question types.