Reading comp PrepTest 138 · Section 1 · Question 22

Passage

Questions 15-22  .        David Warsh's book describes a great  . contradiction inherent in economic theory since 1776,  . when Remaining source text redacted.
Passage walkthrough
Passage Summary

Topic: Social Science


Paragraph 1

  • Paragraph note
    • Paradox introduced (Pin Factory vs. Invisible Hand)
  • Views, minor Meta-Structures, and the author's attitude
    • Warsh's view: There's a contradiction in Smith's economic theory between the "Pin Factory" and the "Invisible hand" (first and last sentences)
    • Author's attitude: "great contradiction" (first sentence)

Paragraph 2

  • Paragraph note
    • Background on Pin Factory (more employees = more efficient) and Invisible Hand (competition leads to public goods)
  • Views, minor Meta-Structures, and the author's attitude
    • Smith's views:
      • Pin Factory: Increased size results in increased efficiency, as each employee can produce more when they specialize in one task (first and second sentences)
      • Invisible Hand: Self-interest can promote the common good without anyone intending to (third sentence)
    • Example of Invisible Hand:
      • Businesses sell goods to make money, but end up making people who buy them happy (last sentence)

Paragraph 3

  • Paragraph note
    • Paradox explained (Pin Factory model reduces competition, undermining Invisible Hand model)
  • Views, minor Meta-Structures, and the author's attitude
    • Comparison between Pin Factor and Invisible Hand, according to the author:
      • The Pin Factory's emphasis on increasing returns leads to bigger businesses and eventually results in monopolies (second and third sentences)
      • But the Invisible Hand requires a lot of competition, so it rests on the assumption that returns diminish as businesses get bigger (fourth through last sentences)
    • Cause-and-effect relationship, according to the author:
      • A large business’s ability to achieve larger scale and lower costs causes smaller firms to be driven out of the industry, which eventually causes industries to be dominated by a few monopolies (third and fourth sentences)
    • Author's attitude: "are opposed" (first sentence); "create a natural tendency" (third sentence); "to work properly, there must be many competitors" (fifth sentence); "depends on the assumption that returns to scale are diminishing" (last sentence)

Paragraph 4

  • Paragraph note
    • Marsh on why Pin Factory was de-emphasized by economists (harder to represent mathematically)
  • Views, minor Meta-Structures, and the author's attitude
    • Marsh's view:
      • Economists de-emphasized the Pin Factory model because they aspired to represent models mathematically (like science), and the Pin Factory was very hard to represent with math (third through last sentences)
    • Comparison, according to Marsh:
      • The economics of diminishing returns (Invisible Hand) was easy to represent mathematically, while increasing returns (Pin Factory) was very difficult (last sentence)

Paragraph 5

  • Paragraph note
    • Recent update (Economists finally found ways to represent Pin Factory mathematically)
  • Views, minor Meta-Structures, and the author's attitude
    • Author's view:
      • Economists failed for a long time to describe the Pin Factory, even though the Pin Factory model was apparent in many industries; finally, in the 1970s, economists succeeded in representing the Pin Factory with enough rigor to make it mainstream (first through last sentences)
    • Example of industries that followed the Pin Factory model: railroads (first sentence)
    • Definition of "underground river": increasing returns (third sentence)
    • Author's attitude: "increasing returns obviously characterized many industries" (first sentence); "had finally found ways to describe the Pin Factor with the rigor needed to make it respectable" (last sentence)

Main Point: Since it was seen to contradict the Invisible Hand and was hard to model mathematically, the Pin Factory (increasing economies of scale) was de-emphasized in economics for hundreds of years until recent mathematical models described it and entered the mainstream.

Key Lines?

Paragraph 1, Sentences 1-2 (P1, S1-S2) - A paradox is introduced

P2, S1 - One-half of the paradox is described

P2, S3 - The other half is described

P3, S4-S5 - The paradox is stated

P4, S2-S3 - A question is asked and answered

P5, S3-S4 - A recent development in economics relevant to the paradox

Meta-Structure?

Paradox/Resolution: This passage utilizes a Paradox/Resolution Meta-Structure.* The author starts the passage by introducing a contradiction, which we can view as a paradox. But there's an interesting facet to the paradox here. This paradox surrounds the contradiction between the Pin Factory and the Invisible Hand, as the former assumes increasing returns to scale, but the latter argues for decreasing returns. And while the author does show that the Pin Factory math has been shown to work out and has entered mainstream economic thought, that doesn't resolve the inherent contradiction between the two concepts. If anything, it makes it worse by suggesting that there are increasing returns to scale in some industries, thus undercutting a central assumption of the concept of the Invisible Hand!

So, usually, the main point in a Paradox/Resolution passage is the author's resolution. But here, the author doesn't quite resolve the paradox. So, the main point can't be the resolution. However, the paradox is still central to the passage, and so we should explore what aspect of the paradox was key to this passage. Since the passage focuses much more on the Pin Factory/increasing returns to scale — talking about how it leads to a contradiction, how it was downplayed for centuries, and how it's recently entered mainstream economic thought — that half of the paradox is the main topic of the passage. We summed up the author's thought on this half of the paradox, as you can see from what we wrote above.

*We think that's the best fit for the passage, but there are several other answer options you could go with. Either Debate Meta-Structure — Describing or Resolving a Debate — could work for this passage. The passage also uses a Question/Answer Meta-Structure in the fourth paragraph, but this Meta-Structure could be applied to the entire passage as well. We'll use this as an opportunity to remind you that there's usually more than one Meta-Structure that could fit the passage!

Last Thoughts?

This is a tough passage, both conceptually and in the details. It also has eight questions associated with it, which tells us that the LSAT felt there was a lot to ask about. However, the passage is broken up nicely into paragraphs that each deal with a single and distinct concept, so we're going to rely on our paragraph-by-paragraph notes to ensure that we can find the right information as needed, and we're not going to rely on our memory for these questions — especially for a topic that we're unfamiliar with, our memories are bad! (Unless you're an Econ major, in which case, this is a nice present!)

Question prompt

Which one of the Remaining source text redacted.
Why the credited answer is right

Credited answer: E

The notes below walk through why it fits the stem and how to eliminate the rest.

Question Type

Social Science

Strategy Overview

Review the author's statements about the relationship between increased size and monopoly power, determine weaknesses in that claim to anticipate how to weaken it, and select the answer choice that makes the claim less convincing

Answer Anticipation

We'll approach Weaken questions in Reading Comprehension in a very similar manner as we would in Logical Reasoning. We can review the excerpt from the passage, just like we'd carefully read an argument in LR. We'll then interrogate the claim for any weaknesses, as the correct answer on both RC and LR will probably weaken the claim by exploiting a problem. Additionally, causation flaws are commonplace on Weaken questions in both RC and LR, so we should be especially mindful of those.So, first, let's find the connection that the author draws between monopoly power and increased size. Our note for the third paragraph should point us there, since that brings up how the "Pin Factory model reduces competition." There, we can see that the author claims that a large business’s ability to achieve larger scale and lower costs causes smaller businesses to be driven out of the industry, which eventually causes industries to be dominated by a few monopolies (P3, S3-S4).This is a causal claim. It essentially says that a large business's increasing returns cause small businesses to lose and monopolies to form. The most common way to weaken a causal claim on the LSAT is by undermining the correlation. In this case, the correct answer might show other instances in which a larger business achieves increasing returns but do not drive small businesses out of the industry. This technique is often called "cause without the effect." Alternatively, the correct answer could show an effect produced without the supposed cause preceding it. In this case, that might involve monopolies forming even when larger businesses do not experience increasing returns. This technique is often called "effect without the cause." Either would undermine the correlation linking the increasing returns to monopoly power.That said, many things could feasibly weaken the connection between increasing returns to monopoly power, so we should keep an open mind as we progress through the answer choices. We'll start by asking ourselves, "Does this make the belief that increasing returns lead to monopolies less convincing?"

Answer choices

  1. A
    In some industries, there Remaining source text redacted.
    Why choice A is not credited

    (A) Does this make the belief that increasing returns lead to monopolies less convincing?

    Nope. These large businesses may still be the largest in their regions, even if there are larger businesses elsewhere. These relatively large businesses can still exert monopoly power in their regions, so it lines up with the belief that increasing returns lead to monopolies.

  2. B
    As the tasks workers Remaining source text redacted.
    Why choice B is not credited

    (B) Does this make the belief that increasing returns lead to monopolies less convincing?

    No. If anything, being able to pay workers less while producing more would result in a business doing even better financially, thus resulting in an even stronger ability to outcompete smaller companies — and thus strengthening their monopoly. Ah, capitalism ...

  3. C
    When an industry is Remaining source text redacted.
    Why choice C is not credited

    (C) Does this make the belief that increasing returns lead to monopolies less convincing?

    Not quite. The passage doesn't say that the Pin Factory model always leads to a pure monopoly, just that it has a tendency in that direction (P3, S3). If the big players collude on pricing and still keep the little players out of the market, then that aligns with the overall view that increasing returns lead to monopolies.

  4. D
    The size that a Remaining source text redacted.
    Why choice D is not credited

    (D) Does this make the belief that increasing returns lead to monopolies less convincing?

    No. The author didn't say that the point at which businesses achieve increasing returns is the same for every industry. As long as there's a point where businesses can achieve increasing returns and outcompete smaller companies in each industry, it doesn't matter whether that point varies from industry to industry.

  5. E
    If a business has Remaining source text redacted.
    Why choice E matches the stem

    (E) Does this make the belief that increasing returns lead to monopolies less convincing?

    Yes! As we anticipated, this provides an example of the cause occurring without the effect. Here, a business becomes large enough to achieve increasing returns through the specialization of its workers. However, this business will not be able to outcompete smaller companies since higher costs offset the increased productivity.

    In other words, this answer choice implies that smaller companies may be able to compete with larger companies with specialized workers. If smaller companies can spend less on employee training and retention, they may be able to offer their goods at prices that are competitive with the large companies' prices. In that case, the smaller companies may not be driven out of the industry by the larger companies. And that weakens the author's belief that larger businesses will achieve increasing returns that allow them to drive smaller businesses out of the industry. 

What this tests

Question analytics

Based on historical answer selection rates for this question.

Answer choice distribution

  1. A 19%
  2. B 4%
  3. C 13%
  4. D 9%
  5. E Credited 55%

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Discussion

  • Choice E 1 reply

    Started by DavidW

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