Critical Reasoning

jaiswalamrita wrote:Sorry to open an old thread, but I am not able to strike option E out.

(E) Interest rates paid by California banks to depositors are lower than those paid by banks in other parts of the United States because in California there is less competition to attract depositors.

Even this option brings in new reason of high interest rate on personal loan.
This is how I interpreted it:

There are fewer banks in Cal
Fewer banks so less competition
Less competition so these banks offer less interest rate on deposits
Less interest rate so they get less deposits (because depositors are less attracted)
Less deposits so bank has less fund to disburse as loan
Less fund to disburse hence bank increased the interest rate on loan

As per me this is what happens in practical also.

Please let me know whats wrong with this reasoning.

lunarpower wrote:

svaradhan wrote:I have a doubt with answer choice A. It states - "Because of the comparatively high wages they must pay to attract qualified workers, California banks charge depositors more than banks elsewhere do for many of the services they offer". But the argument is based on high interest rates for personal loans right? Where did depositors come into picture? Is this not out of scope? Please clarify

this is a 'weaken the conclusion' part. to weaken the conclusion of a passage, you have to do the following 2 things:
* identify an assumption that holds in the passage - THIS must remain within the scope of the argument
* find a piece of OUTSIDE information that strikes down that assumption - THIS generally must come from OUTSIDE the scope of the original argument

in this problem, the questionable ASSUMPTION is the logical inference that the shortage of competition must be responsible for the higher interest rates; that is indeed within the scope of the passage.
HOWEVER,
to weaken the conclusion, you HAVE to bring in outside information: viz., an alternative explanation for the higher interest rates. obviously, an alternative explanation is going to have to come from outside the scope of the original passage!

in fact, the only way a correct 'weaken the conclusion' answer can stay completely within the scope of the original passage is to directly contradict one of the passage's premises; this pretty much doesn't happen (too simplistic, and not in keeping with the generally sacrosanct nature of the factual statements put forth as premises), so you should essentially always be looking outside the passage for statements that weaken the conclusion.