Q4.
Small business groups are lobbying to defeat proposed federal legislation that would substantially raise the federal minimum wage. This opposition is surprising since the legislation they oppose would, for the first time, exempt all small businesses from paying any minimum wage.
Which of the following, if true, would best explain the opposition of small-business groups to the proposed legislation?
(A) Under the current federal minimum-wage law, most small businesses are required to pay no less than the minimum wage to their employees.
(B) In order to attract workers, small companies must match the wages offered by their larger competitors, and these competitors would not be exempt under the proposed laws.
(C) The exact number of companies that are currently required to pay no less than the minimum wage but that would be exempt under the proposed law is unknown.
(D) Some states have set their own minimum wages—in some cases, quite a bit above the level of the minimum wage mandated by current federal law—for certain key industries.
(E) Service companies make up the majority of small businesses and they generally employ more employees per dollar of revenues than do retail or manufacturing businesses.
Solutions: *Small businesses are against the legislation yet it would seem to benefit them. We’re looking for an answer choice that will reconcile these two choices together. (A) does not explain anything because all it says is that it will be a benefit for small businesses to be exempt. (C) and (D) don’t explain why small businesses would be against the legislation. The original argument doesn’t talk about service companies and therefore (E) is incorrect. The correct answer is (B) because it explains the paradox.
Q10.
In 1960, 10% of every dollar paid in automobile insurance premiums went to pay costs arising from injuries incurred in car accidents. In 1990, 50% of every dollar paid in automobile insurance premiums went toward such costs, despite the fact that cars were much safer in 1990 than in 1960.
Which of the following, if true, best explains the discrepancy outlines above?
(A) There were fewer accidents in 1990 than in 1960.
(B) On average, people drove more slowly in 1990 than in 1960.
(C) Cars grew increasingly more expensive to repair over the period in question.
(D) The price of insurance increased more rapidly than the rate of inflation between 1960 and 1990.
(E) Health-care costs rose sharply between 1960 and 1990.
Solutions: *Best explains/discrepancy = paradox question. Portion of dollars paid has increased but cars are much safer now. (C) is irrelevant to the question because the question is not about repair costs. The correct answer is (E); even though cars are safer in 1990, healthcare costs rose in 1990.
Q55.
Recently, many people in a certain county have stopped buying new apartments. This has happened because of high taxes that have been introduced by the county tax office and the high rate of unemployment that has hit the county. However, the average price of a new apartment has almost doubled in the county.
Which of the following, if true, best explains the increase in the average price of a new apartment?
(A) The price of used apartments has climbed steadily over the past five years
(B) There will be a tax reduction later in the year which is expected to aid moderate and low income families
(C) The marker for new apartments has been unaffected by current economic conditions
(D) Economic conditions are expected to get significantly worse before the end of the year.
(E) In anticipation of low demand for new apartments there has been a large decrease in construction
Solutions: *This is a tricky question. Two trends: people stop buying apartments and the average rent is increasing. These two trends are related and there is something that links the two trends. (A) is not correct because it only shows one of the trends. (A) is considered to be a trap answer. (B) explains the downward trend but not the upward trend so it’s not (B). (C) Doesn’t explain the increase in the average of the price of the apartment. (E) is the correct answer; it is not what we would expect if we know anything about economics. What we’d expect is that if the average price is going up then construction will increase, but we can’t go with the outside world when answering with these questions. Instead, we need to see the facts presented in the questions. All that we can say is that the low demand for the apartments has shown a decrease in construction. (E) links the two trends together.
These questions are always about reconciling a trend.
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