Reading comp PrepTest 148 · Section 2 · Question 16

Passage

 . Passage A  .       Insider-trading law makes it a crime to make  . stock transactions, or help others make stock Remaining source text redacted.
Passage walkthrough
Passage Summary

Topic: Legal Studies


Passage A

Paragraph 1

  • Paragraph note
    • A crime is defined
  • Views, minor Meta-Structures, points of intersection, and the author's attitude
    • Insider trading - stock transactions based on special info from working for the company

Paragraph 2

  • Paragraph note
    • Author questions the whether it should be a crime
  • Views, minor Meta-Structures, points of intersection, and the author's attitude
    • Trading based on info only you have - isn’t that part of a functioning market?
    • g. Analyzing a stock and deciding it’s overvalued (did your homework)

Paragraph 3

  • Paragraph note
    • How stock markets work, and when they function best
  • Views, minor Meta-Structures, points of intersection, and the author's attitude
    • Stock market - Reflects everyone’s info
    • Work best - All relevant info is spread widely and quickly

Paragraph 4

  • Paragraph note
    • Tying insider trading to functional stock market
  • Views, minor Meta-Structures, points of intersection, and the author's attitude
    • Insider info → Buy/sell a stock → Get that info out → Good for everyone!

Paragraph 5

  • Paragraph note
    • Insider trading compared to something else
  • Views, minor Meta-Structures, points of intersection, and the author's attitude
    • “Insider nontrading” - when someone doesn’t sell/buy because of what they know
    • More common and clearly legal

Passage B

Paragraph 1

  • Paragraph note
    • A basic principle of the stock market is noted
  • Views, minor Meta-Structures, points of intersection, and the author's attitude
    • Basic principle - Transparency - Everyone has all the info at the same time, and skill determines who makes money

Paragraph 2

  • Paragraph note
    • Insider trading is showed to violate this principle
  • Views, minor Meta-Structures, points of intersection, and the author's attitude
    • Insider trading - Some make decisions that others don’t
    • Author - That’s unfair
    • Outcome - Difficult/impossible for some to make money

Paragraph 3

  • Paragraph note
    • Eventual repercussions of insider trading
  • Views, minor Meta-Structures, points of intersection, and the author's attitude
    • People - Invest to make money
    • People trade with insider info → Investors lose confidence → Stop investing → Market destroyed

Main Points:

Passage A - Because it’s analogous to a practice that should clearly be legal and it gets information out quickly, insider trading is good for the stock market.

Passage B - Because it unfairly compromises the market and doesn’t reward skilled investing, insider trading can cause a loss of investor confidence that will destroy the market.

Key Lines?

Passage A:

  • Lines 6-8 - Rhetorical question that shows Author’s attitude
  • Lines 16-18 - Author’s opinion of when markets work “best”
  • Paragraph 4 - Step-by-step argument of how insider trading helps
  • Lines 35-36 - Author uses comparison to make same point

Passage B:

  • Lines 37-38 - Author states “basic principle[]” of stock market
  • Lines 50-51 - Author states opinion on insider trading (unfair)
  • Paragraph 3 - Step-by-step argument of how insider trading hurts

Meta-Structure? Relationship Between Passages?

Both passages feature strong opinions on the same topic - insider trading. However, their opinions are the opposite of each other. Passage A believes that insider trading is good for the stock market, in that it “helps spread the knowledge” quickly (Lines 24-27). Passage B, on the other hand, argues that it will “destroy the market” through a loss of investor confidence (Lines 55-56).

Causal chain - Both passages feature a causal chain of how insider trading will lead to the outcome they predict, even if that outcome is different. Passage A argues that someone learns insider info, causing them to trade on it, causing others to notice the change in price, causing the information to spread (Paragraph 4). Passage B argues that someone learns insider info, causing them to trade on it, causing others to lose confidence that they can make money without insider info, causing them to stop investing, causing the market to crash (Paragraph 3). These causal progressions will likely feature in at least one question.

Last Thoughts?

Passage A’s comparison to “insider nontrading” is interesting in that it almost functions as a separate argument, and one that falls into a common pattern of reasoning. If that paragraph was removed from the passage, the Author’s initial argument would still stand on its own. And that last paragraph could itself serve as the basis for a separate passage on why insider trading should be legal. It also serves as one of our common methods of reasoning - showing that similar logic in an analogous case leads to a ridiculous outcome (“No one would think to…”).

Question prompt

The authors would be Remaining source text redacted.
Why the credited answer is right

Credited answer: C

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

Question Type

Legal

Strategy Overview

Identify any overlap between the two arguments, then find that in the answers

Answer Anticipation

Based on our initial reading of each passage, we know that they disagree on the main topic - insider trading - with Passage A saying it’s good and Passage B saying it’s bad. That makes this Point of Agreement question a bit weird - they disagree on so much that a Point at Issue question seems more appropriate!However, there must be some overlap in what they say. It can’t deal with their overall viewpoint, so it must be a detail or sub-conclusion that they put forward. We didn’t really note anything while reading, though, so we should head to the answers and then use our notes to check to see if we can find one that shows up in both.And we also have to stay open to a trick answer - one that strips opinion out while still reflecting it. For example, both Authors agree that insider trading can have an impact on the stock market overall (even if they disagree on what that impact is).

Answer choices

  1. A
    insider trading tends to Remaining source text redacted.
    Why choice A is not credited

    (A) (Lines 55-56) Passage B states this, but the Author of Passage A doesn’t say anything about investor confidence. However, in taking a positive view of insider trading, if anything, that suggests she doesn’t think it would have a negative effect on the market, so this is closer to a point at issue.

  2. B
    all information should be Remaining source text redacted.
    Why choice B is not credited

    (B) (Lines 16-18; Lines 37-40) The Author of Passage B says that this is the case in a transparent market, and markets should be transparent. He agrees with this answer. However, in Passage A, the Author notes that information should be “spread as widely as possible, as quickly as possible.” That doesn’t guarantee everyone will have the information at the same time, so she doesn’t agree with this answer, making it a point at issue.

  3. C
    it is appropriate for Remaining source text redacted.
    Why choice C matches the stem

    (C) (Lines 11-15; Lines 38-42) The Author of Passage A says that analyzing a stock, deciding it’s overvalued, and selling it is an example of someone who’s “done [their] homework,” so she’d agree with this answer. And the Author of Passage B says that in a transparent market (which is ideal/reflects a basic principle), advantages are gained “only by skill in analyzing” stocks and making good investments, so he also agrees with this answer. This answer is therefore a point of agreement between them.

  4. D
    insider nontrading should be Remaining source text redacted.
    Why choice D is not credited

    (D) (Lines 31-36) Only Passage A discusses insider nontrading, so we can’t infer Passage B’s opinion on it.

  5. E
    insider trading is the Remaining source text redacted.
    Why choice E is not credited

    (E) (Lines 16-18; Lines 24-30; Lines 55-56) The Author of Passage A does claim that insider trading allows information to spread out quickly, and she establishes that stock markets work best when information is spread as widely as possible, as quickly as possible. However, she never says that insider trading is the best way to spread that information as quickly as possible. And Passage B argues that insider trading can destroy the market, so even if we thought Passage A agreed with this answer, Passage B definitely disagrees with it and thus this is a point at issue.

What this tests

Question analytics

Based on historical answer selection rates for this question.

Answer choice distribution

  1. A 4%
  2. B 29%
  3. C Credited 59%
  4. D 4%
  5. E 4%

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