Consumers in California seeking personal loans have fewer banks to turn to than do consumers elsewhere in the United States. This shortage of competition among banks explains why interest rates on personal loans in California are higher than in any other region of the United States.
Which of the following, if true, most substantially weakens the conclusion above?
(A) 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 me services they offer.
(B) Personal loans are riskier than other types of loans, such as home mortgage loans, that banks make.
(C) Since bank deposits in California are covered by the same type of insurance that guarantees bank deposits in other parts of the United States, they are no less secure than deposits elsewhere.
(D) The proportion of consumers who default on their personal loans is lower in California than in any other region of the United States.
(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.
What is wrong with option D?
OA A
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Consumers in California
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The argument proceeds by noting that interest rates on personal loans are higher in California than in other states. The argument also notes that there are fewer banks in California. The argument then concludes that the lack of banks causes higher interest rates.
What is wrong with (D)? Answer choice D tells us that consumers in California are less likely to default on loans. If that is true, one would expect that interest rates in California would be lower. However, in reality, they are higher. So (D) does not offer an alternate cause for higher rates in California.
Answer choice (A), the credited response, suggests that banks must charge higher rates in order to pay the higher wages that California workers earn. Accordingly, it offers an alternate cause than the one stated in the argument. This is why it is the best answer.
What is wrong with (D)? Answer choice D tells us that consumers in California are less likely to default on loans. If that is true, one would expect that interest rates in California would be lower. However, in reality, they are higher. So (D) does not offer an alternate cause for higher rates in California.
Answer choice (A), the credited response, suggests that banks must charge higher rates in order to pay the higher wages that California workers earn. Accordingly, it offers an alternate cause than the one stated in the argument. This is why it is the best answer.
Elias Latour
Verbal Specialist @ ApexGMAT
blog.apexgmat.com
+1 (646) 736-7622
Verbal Specialist @ ApexGMAT
blog.apexgmat.com
+1 (646) 736-7622
