The profitability of a business

Answer choices

1. A

   Correct93% picked this

   Large income differences between fixed-salary employees and senior staff tend to

   Why this is right

   This is the missing link we predicted. Pay SS greatly lower reduce not w/ stock ? increase ? emp ? profit ? wise pay gap morale If we negated this answer and said, "hey, author -- large differences in income between senior staff and fixed salary employees doesn't tend to hurt employee morale", that would badly weaken the argument. The only way the author has of arguing that this is "not a wise policy" is by connecting stock options to lower profits, via the idea that paying with stock options will undermine morale.

   Skill tested: Necessary Assumption · how this choice captures the argument's function is the move to repeat next time.

   93%
2. B

   Too Strong: usually2% picked this

   Reductions in the profitability of a company are usually due to

   We were told that a reduction in employee morale leads to a reduction in profitability. I could similarly say, "being stung by a bee leads to a child crying". That doesn't mean I'm assuming that "the tears of children are usually due to a bee sting". This author doesn't care if dips in profit are due to low employee morale 51% of the time (usually) vs. only 49% of the time (not-usually). This is essentially selling us a soft version of an illegal reversal. We were told this: if it lowers morale, then it lowers profits And this answer is saying if profits are lower, then morale is usually lower

   2%
3. C

   Irrelevant Comparison1% picked this

   Business firms that pay senior staff with stock options are less profitable

   The author is only thinking that paying senior staff with stock options makes a company less profitable than it was before, not that it makes a company less profitable than other companies. If Goldman Sachs, which makes billions in profits, decides to pay senior staff with stock options, the author thinks they will go from $50 B in profits to $40 B. But that doesn't mean the author assumes that Goldman Sachs is less profitable than firms who don't pay senior staff with stock options.

   1%
4. D

   Too Strong: invariably Illegal Negation2% picked this

   Reducing the difference in income between senior staff and employees paid only a fixed salary invariably

   The author thinks that dramatically increasing leads to the diff in income between ? lower seniors and fixed salary profitability This answer is trying to trap people into picking an illegal negation of that: decreasing the diff leads to in income between ? higher seniors and fixed salary profitability Negating this answer would give us, "There is at least one case in which the difference in income between senior and regular employees was reduced, but it did not increase a company's profitability". That wouldn't hurt the argument at all, so we know this answer can't be correct.

   2%
5. E

   Out of Scope: productive1% picked this

   Employees whose incomes rise as the profits of their employers rise are more productive than those paid

   The concept of productivity is never discussed, so the author doesn't need to assume anything about that concept.

   1%