Consumers in California seeking personal loans have fewer : GMAT Critical Reasoning (CR)
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# Consumers in California seeking personal loans have fewer

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Consumers in California seeking personal loans have fewer [#permalink]

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28 Jul 2006, 09:28
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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 the 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.

Need help here.
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28 Jul 2006, 09:40
A.

I think it is the only choice that weakens the conclusion drawn in the stem by attributing higher interest rates to the fact that the californian banks have to pay higher wages to retain talent and hence charge higher for services rather than to shortage of competition.
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28 Jul 2006, 09:51
I think its B.

A (Talks generally for all bank services not specific to personal loan)
C & E out of Scope.
D strengthens

Took 2.5 minutes
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28 Jul 2006, 09:58
dwivedys wrote:
A.

I think it is the only choice that weakens the conclusion drawn in the stem by attributing higher interest rates to the fact that the californian banks have to pay higher wages to retain talent and hence charge higher for services rather than to shortage of competition.

point taken, but it doesn't explain about the relationship with loans.
I think it's out of scope.

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.
Can we apply this reason to higher interest rates for loans??
Are depositors equal to borrowers?
Does a loan belong to many of the services they offer?
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28 Jul 2006, 10:10
freetheking wrote:
dwivedys wrote:
A.

I think it is the only choice that weakens the conclusion drawn in the stem by attributing higher interest rates to the fact that the californian banks have to pay higher wages to retain talent and hence charge higher for services rather than to shortage of competition.

point taken, but it doesn't explain about the relationship with loans.
I think it's out of scope.

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.
Can we apply this reason to higher interest rates for loans??
Are depositors equal to borrowers?
Does a loan belong to many of the services they offer?

My bad.. I am sorry.. I completely missed it. You are right A is out.

B looks good to me for the same reasons I had cited earlier for A.
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28 Jul 2006, 10:19
dwivedys wrote:
freetheking wrote:
dwivedys wrote:
A.

I think it is the only choice that weakens the conclusion drawn in the stem by attributing higher interest rates to the fact that the californian banks have to pay higher wages to retain talent and hence charge higher for services rather than to shortage of competition.

point taken, but it doesn't explain about the relationship with loans.
I think it's out of scope.

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.
Can we apply this reason to higher interest rates for loans??
Are depositors equal to borrowers?
Does a loan belong to many of the services they offer?

My bad.. I am sorry.. I completely missed it. You are right A is out.

B looks good to me for the same reasons I had cited earlier for A.

Sorry, I didn't mean to offend u.
OA is A..(source CR1000 gmat club)
Still, I don't get it....
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28 Jul 2006, 10:30
Should be A.

When you see weakening type questions then try to find another reason for effect.

More salary to employees----> More expenses to bank -----> To earn profit bank has to increase intrest rates.

So this is the cause not the one mentioned in the passage.
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28 Jul 2006, 10:33
ps_dahiya wrote:
Should be A.

When you see weakening type questions then try to find another reason for effect.

More salary to employees----> More expenses to bank -----> To earn profit bank has to increase intrest rates.

So this is the cause not the one mentioned in the passage.

Thanks, ps_dahiya. Good strategy.
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28 Jul 2006, 10:40
freetheking wrote:
dwivedys wrote:
freetheking wrote:
dwivedys wrote:
A.

I think it is the only choice that weakens the conclusion drawn in the stem by attributing higher interest rates to the fact that the californian banks have to pay higher wages to retain talent and hence charge higher for services rather than to shortage of competition.

point taken, but it doesn't explain about the relationship with loans.
I think it's out of scope.

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.
Can we apply this reason to higher interest rates for loans??
Are depositors equal to borrowers?
Does a loan belong to many of the services they offer?

My bad.. I am sorry.. I completely missed it. You are right A is out.

B looks good to me for the same reasons I had cited earlier for A.

Sorry, I didn't mean to offend u.
OA is A..(source CR1000 gmat club)
Still, I don't get it....

It's perfectly alright we are all trying to learn together so there's no offense anyway.

I used the logic that PS has described below for choosing A; However i got confused when you pointed the difference between depositor and borrower.. I flip flopped sadly on this one..
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Re: CR:interest rates in CA [#permalink]

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28 Jul 2006, 22:09
freetheking wrote:
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 the 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.

Need help here.

It's straight A.

Banks in California have to setoff their expenses in terms of high wages they pay to their employees.
So this can be offset by increasing the loan interests.

Regards,
Brajesh
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29 Jul 2006, 06:35
Should be "A"

Conclusion is "there is no competition" that's why higher interest rates but the reason is different as shown in "A"
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29 Jul 2006, 06:38
Initially eliminated A because I misread the passage, but now it makes sense. Great CR!
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31 Jul 2006, 01:32
Clear winner A.

Gives an alternate explanation for the higher interest rates in CA banks.
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Re: CR:interest rates in CA [#permalink]

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31 Jul 2006, 13:20
This is a tricky one, mainly because of how the question is asked. I chose A because the other answers all strengthen or are neutral to the conclusion. Only A weakens it.
Re: CR:interest rates in CA   [#permalink] 31 Jul 2006, 13:20
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