LSAT 102 – Section 3 – Question 13

LSAT 102 - Section 3 - Question 13

June 1998

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Question
QuickView		 Type Tags Answer
Choices		 Curve Question
Difficulty		 Psg/Game/S
Difficulty		 Explanation
PT102 S3 Q13
+LR
+Exp
Necessary assumption +NA
Net Effect +NetEff
Math +Math
A
76%
165
B
21%
162
C
1%
156
D
2%
158
E
1%
154
127
145
163
 +Medium 147.613 +SubsectionMedium

A company with long-outstanding bills owed by its customers can assign those bills to a collection agency that pays the company a fraction of their amount and then tries to collect payment from the customers. Since these agencies pay companies only 15 percent of the total amount of the outstanding bills, a company interested in reducing losses from long-outstanding bills would be well advised to pursue its debtors on its own.

Summary
The argument concludes that companies with long-outstanding debts would better reduce their losses by going after their debtors than by selling the debts to collection agencies. In support, the argument claims that collection agencies only pay 15 percent of the amount debtors owe.

Notable Assumptions
The argument assumes that the companies in question would recover more than 15 percent of the outstanding debts if they went after the debtors themselves. It also assumes that it wouldn’t cost companies so much to recover the debts that they would net less than 15 percent of the amount owing.
Without these assumptions, there’s no way that companies could reduce their losses by collecting debts themselves compared to selling the debts.

A
a company that pursues its debtors on its own typically collects more than 15 percent of the total amount of the long-outstanding bills that it is owed
This is necessary a company to reduce its losses more by pursuing debtors itself, rather than by selling the debts for 15 percent of their amount. In other words, this is necessary for pursuing debtors to be the financially wiser option.
B
the cost to a company of pursuing its debtors on its own for payment of long-outstanding bills does not exceed 15 percent of the total amount of those bills
Without knowing what percentage of the debt a company would actually collect, this isn’t necessary. For example, if a company collects 50 percent of its debts but spends 20 percent of the amount owed, that’s still way better than selling the debt for 15 percent.
C
collection agencies that are assigned bills for collection by companies are unsuccessful in collecting, on average, only 15 percent of the total amount of those bills
The amount that a collection agency is able to recover is irrelevant to how much a company would be able to recover when pursuing debts itself. We can’t assume that companies would recover the same amount as do collection agencies.
D
at least 15 percent of the customers that owe money to companies eventually pay their bills whether or not those bills are assigned to a collection agency
15 percent of customers paying their bills isn’t relevant to us, because we don’t know what proportion of the total debt is owed by those customers.
E
unless most of the customers of a company pay their bills, that company in the long run will not be profitable
This is irrelevant—the argument isn’t concerned with profitability and customers paying their bills, but only with the best way to approach long-outstanding debts.

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LSAT PrepTest 102 Explanations

Section 1 - Reading Comprehension

Section 2 - Logical Reasoning

Section 3 - Logical Reasoning

Section 4 - Logical Reasoning

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