Reading comp PrepTest 148 · Section 2 · Question 18

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

Passage A, unlike passage Remaining source text redacted.
Why the credited answer is right

Credited answer: B

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

Question Type

Legal

Strategy Overview

Review our big-picture notes for the two passages, then dive into the answers

Answer Anticipation

Let’s look at what we said in our paragraph notes for each passage.Passage A defined a crime, raised a rhetorical question about it, talked about in principle how stock markets work best, and then worked through a causal chain of how insider trading is good for the stock market. She then separately compared it to an analogous practice to show that making it illegal would be absurd.Passage B brought up a basic principle of the stock market, showed how insider trading violates this principle while defining the crime, and finally argued for a causal chain on how this would harm the stock market.Both passages speak of basic principles, definitions of crimes, and causal chains. What’s unique to Passage A? The rhetorical question and the comparison/analogy. Let’s find an answer reflecting the latter while avoiding trap answers mentioning the former.

Answer choices

  1. A
    applying general principles to Remaining source text redacted.
    Why choice A is not credited

    (A) (Lines 16-18; Lines 37-40) Both passages bring up general principles of the stock market, though neither applies them to specific examples, so this answer is wrong.

  2. B
    pointing out similarities between Remaining source text redacted.
    Why choice B matches the stem

    (B) (Lines 8-15; Lines 31-36) Passage A compares insider trading to insider nontrading, which “[n]o one would think” to consider a crime, and it also relates insider trading to analysis/doing research, so Passage A uses this method of reasoning. Passage B doesn’t talk about any uncontroversial activity that it compares to insider trading. This answer is therefore correct.

  3. C
    describing the consequences that Remaining source text redacted.
    Why choice C is not credited

    (C) (Paragraph 4 of Passage A; Paragraph 3 of Passage B) Both passages walk through causal chains starting with insider trading, so both discuss the consequences of allowing it. Passage A thinks it’d get information out quickly; Passage B thinks it’ll erode confidence and potentially destroy the market.

  4. D
    showing how a specific Remaining source text redacted.
    Why choice D is not credited

    (D) Similar to (C), both passages discuss insider trading in the context of the broader market, so both passages do this.

  5. E
    examining the motivations of Remaining source text redacted.
    Why choice E is not credited

    (E) (Lines 10-11; Lines 51-54) Both passages suggest that people who engage in insider trading use it to make money, so there’s a discussion of motive in each.

What this tests

Question analytics

Based on historical answer selection rates for this question.

Answer choice distribution

  1. A 9%
  2. B Credited 61%
  3. C 9%
  4. D 16%
  5. E 5%

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