Necessary AssumptionDiff: Medium
Logic Breakdown
Passage Summary: When customers don't pay their bills, companies can sell that debt to an agency for a small fraction of the total amount. The author argues that companies would lose less money if they just chased the debtors down themselves.
Conclusion: A company wanting to minimize losses from unpaid bills should attempt to collect the money itself rather than selling the debt to a collection agency.
Reasoning: Collection agencies only pay the company 15 percent of the total value of the outstanding debt.
Analysis: The argument identifies a clear loss (the 85% the agency keeps) but fails to account for the costs associated with the alternative. For the conclusion to hold true, it must be assumed that the company's internal costs for pursuing these debtors—staffing, legal fees, and time—do not exceed the 85% they are currently 'losing' by using an agency. If it costs 90 cents to collect a dollar, the 15-cent offer from the agency is actually the better deal. Look for an answer that bridges this gap by suggesting the cost of self-collection is lower than the loss taken when selling the debt.
Conclusion: A company wanting to minimize losses from unpaid bills should attempt to collect the money itself rather than selling the debt to a collection agency.
Reasoning: Collection agencies only pay the company 15 percent of the total value of the outstanding debt.
Analysis: The argument identifies a clear loss (the 85% the agency keeps) but fails to account for the costs associated with the alternative. For the conclusion to hold true, it must be assumed that the company's internal costs for pursuing these debtors—staffing, legal fees, and time—do not exceed the 85% they are currently 'losing' by using an agency. If it costs 90 cents to collect a dollar, the 15-cent offer from the agency is actually the better deal. Look for an answer that bridges this gap by suggesting the cost of self-collection is lower than the loss taken when selling the debt.
Passage Stimulus
Passage Redacted
Unlock Full Passage13.The argument depends on the assumption that
Correct Answer
A
A links the conclusion to the needed comparison: if a company typically collects more than 15 percent by pursuing debts itself, then self-collection would reduce losses relative to selling to an agency for 15 percent. Negation test: if the company does not typically collect more than 15 percent (i.e., it collects 15 percent or less), then pursuing debtors on its own would not be better than selling to the agency, and the advice would not be supported. So A is necessary.
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