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How severe should the punishment be for a corporate crime

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Joined: 15 Feb 2016
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Concentration: Finance
How severe should the punishment be for a corporate crime  [#permalink]

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18 Feb 2019, 21:58
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The following passage is adapted from an article
published in 1993.

How severe should the punishment be for a corporate crime- e.g., a crime in which a corporation profits from knowingly and routinely selling harmful products to consumers? Some economists argue that the sole basis for determining the penalty should be the reckoning of cost and benefit: the penalty levied should exceed the profit that accrued to the corporation as a result of committing the crime. For example, if a corporation made a profit of \$6 million from selling an unsafe product and the fine were, say, \$7 million, these economists would feel that justice had been done.

In arguing thus, the economists hold that the fact that a community may find some crimes more abhorrent than others or wish to send a message about the importance of some values-such as, say, not endangering citizens' health by selling tainted food should not be a factor in determining penalties. The law, the economists argue, should affect corporations'earnings rather than try to assess their morality.

But this approach seems highly impractical if not impossible to follow. For the situation is complicated by the fact that an acceptable reckoning of cost and benefit needs to take into account estimated detection ratios-the estimated frequency at which those committing a given type of crime are caught. Courts must assume that not all corporate crimes are detected, and legal wisdom holds that penalties must be higher as detection ratios decrease. Otherwise, a corporation might calculate that since it has only, say, a 1-in-10 chance of being caught committing a crime, even if the potential penalty is somewhat larger than the profit to be gained from violating the law it may still ultimately be more profitable to repeatedly commit the crime.
A true reckoning of cost and benefit would therefore have to take estimated detection ratios into account, but this means that, in the above scenario, if the profit resulting from a crime were \$6 million, the penalty would have to be not \$7 million but at least \$60 million, according to the economists' definition, to be just.

The economists' approach requires that detection ratios be high enough for courts to ignore them (50 percent or more), but recent studies suggest that ratios are in fact closer to 10 percent. Given this, the astronomical penalties necessary to satisfy the full reckoning of cost and benefit might arguably put convicted corporations out of business and throw thousands of people out of work. Thus, some other criterion in addition to the reckoning of cost and benefit-such as the assignment of moral weight to particular crimes- is necessary so that penalties for corporate crimes will be practical as well as just.
1)Which one of the following most accurately captures the main point of the passage?

(A) Because not all corporate crimes are detected, courts must supplement the reckoning of cost and benefit by taking detection ratios into account when determining penalties for such crimes if the penalties are to be both practical and fair.
(B) The reckoning of cost and benefit as the sole basis for determining penalties for corporate crimes would be an appropriate means of assessing such penalties if it took estimated detection ratios into account.
(C) Because they argue that the reckoning of cost and benefit should be the sole basis for determining penalties for corporate crimes, economists do an injustice to communities that believe that the penalties must affect not only corporate earnings but corporate morality.
(D) Because it does not take detection ratios into account, the reckoning of cost and benefit as the sole basis for determining penalties for corporate crimes results in penalties that are not high enough both to satisfy community moral standards and to send a message about the importance of preventing corporate crime.
(E) Because the need to take detection ratios into account makes reckoning cost and benefit impractical as the sole basis for determining penalties for corporate crimes, another method of determining the penalties must be found to supplement such reckoning.

2) The primary purpose of the passage is to

A) criticize courts for their leniency in punishing corporate crime
(B) describe some of the reasons corporations engage in corporate crime
(C) condemn corporations for failing to consider the moral implications of their actions
(D) argue against some economists' view of how to penalize corporate crime
(E) urge the implementation of a specific proposal for penalizing corporate crime

3) Suppose a corporation is convicted of a crime having a detection ratio of l-in-10. Based on the passage, the author would be most likely to endorse which one of the following penalties

(A) a fine exactly equal to the corporation's profit from committing the crime
(B) a fine slightly higher than the corporation's profit from committing the crime
(C) a fine enough higher than the corporation's profit from committing the crime to demonstrate community opinion of the crime without putting the corporation out of business
(D) a fine determined by taking the corporation's profit from committing the crime and raising it tenfold in order to reflect the detection ratio
(E) a fine high enough to put the corporation out of business

4)The author ascribes which one of the following views to the economists discussed in the passage?

(A community's moral judgment of certain corporate crimes is most reliable when the crime in question endangers the community as a whole.
(B) A community's moral judgment of certain corporate crimes is only occasionally useful in determining penalties for such crimes.
(C) A community's moral judgment of certain corporate crimes is often more severe than the penalties levied against such crimes.
(D) A community's moral judgment of certain corporate crimes is irrelevant to assessing the morality of corporations that commit the crimes.
(E) A community's moral judgment of certain corporate crimes is inappropriate in determining penalties for such crimes.

5)Which one of the following most accurately represents the organization of the passage?

(A) A question is raised; one answer to the question is summarized; an important aspect of this answer is presented; a flaw in the answer is identified; the need for an alternative answer is affirmed.
(B) A problem is posed; one solution to the problem is summarized; a view held by those who favor the solution is presented; a criticism of the solution is identified; the criticism is evaluated and rejected.
(C) A view is summarized; the ethics of those who hold the view are discussed; a flaw in the ethics of those holding the view is identified and described in detail; the view is rejected; an alternative view is offered.
(D) A question is raised; two answers to the question are identified and compared; an assumption underlying each answer is identified; the assumption of one answer is found to be incorrect and this answer is rejected.
(E) A problem is posed; the consequences of failing to solve the problem are described; one solution to the problem is suggested; an objection to this solution is described; the proposed solution is rejected.

6) With which one of the following statements would the economists discussed in the passage be most likely to agree?

(A) The possibility of a corporation's going out of business should not be a factor in determining the size of the penalty levied against the corporation for committing a crime.
(B) The community's opinion of the moral offensiveness of a corporate crime should not be a factor in assigning a moral weight to that crime.
(C) The moral offensiveness of a corporate crime should not be a factor in determining the penalty levied against the corporation unless it tends to increase the size of the penalty.
(D) The likelihood of a corporation's recommitting a particular crime should be the main factor in determining the size of the penalty levied against the corporation for committing the crime.
(E) The penalty levied against a corporation for a particular crime should increase in direct relation to the number of times the corporation has previously been convicted of the crime.

Official LSAT Preptest- 77
Intern
Joined: 24 Jul 2018
Posts: 32
Location: India
Re: How severe should the punishment be for a corporate crime  [#permalink]

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18 Feb 2019, 22:39
akanshaxo wrote:
The following passage is adapted from an article
published in 1993.

How severe should the punishment be for a corporate crime- e.g., a crime in which a corporation profits from knowingly and routinely selling harmful products to consumers? Some economists argue that the sole basis for determining the penalty should be the reckoning of cost and benefit: the penalty levied should exceed the profit that accrued to the corporation as a result of committing the crime. For example, if a corporation made a profit of \$6 million from selling an unsafe product and the fine were, say, \$7 million, these economists would feel that justice had been done.

In arguing thus, the economists hold that the fact that a community may find some crimes more abhorrent than others or wish to send a message about the importance of some values-such as, say, not endangering citizens' health by selling tainted food should not be a factor in determining penalties. The law, the economists argue, should affect corporations'earnings rather than try to assess their morality.

But this approach seems highly impractical if not impossible to follow. For the situation is complicated by the fact that an acceptable reckoning of cost and benefit needs to take into account estimated detection ratios-the estimated frequency at which those committing a given type of crime are caught. Courts must assume that not all corporate crimes are detected, and legal wisdom holds that penalties must be higher as detection ratios decrease. Otherwise, a corporation might calculate that since it has only, say, a 1-in-10 chance of being caught committing a crime, even if the potential penalty is somewhat larger than the profit to be gained from violating the law it may still ultimately be more profitable to repeatedly commit the crime.
A true reckoning of cost and benefit would therefore have to take estimated detection ratios into account, but this means that, in the above scenario, if the profit resulting from a crime were \$6 million, the penalty would have to be not \$7 million but at least \$60 million, according to the economists' definition, to be just.

The economists' approach requires that detection ratios be high enough for courts to ignore them (50 percent or more), but recent studies suggest that ratios are in fact closer to 10 percent. Given this, the astronomical penalties necessary to satisfy the full reckoning of cost and benefit might arguably put convicted corporations out of business and throw thousands of people out of work. Thus, some other criterion in addition to the reckoning of cost and benefit-such as the assignment of moral weight to particular crimes- is necessary so that penalties for corporate crimes will be practical as well as just.
1)Which one of the following most accurately captures the main point of the passage?

(A) Because not all corporate crimes are detected, courts must supplement the reckoning of cost and benefit by taking detection ratios into account when determining penalties for such crimes if the penalties are to be both practical and fair.
(B) The reckoning of cost and benefit as the sole basis for determining penalties for corporate crimes would be an appropriate means of assessing such penalties if it took estimated detection ratios into account.
(C) Because they argue that the reckoning of cost and benefit should be the sole basis for determining penalties for corporate crimes, economists do an injustice to communities that believe that the penalties must affect not only corporate earnings but corporate morality.
(D) Because it does not take detection ratios into account, the reckoning of cost and benefit as the sole basis for determining penalties for corporate crimes results in penalties that are not high enough both to satisfy community moral standards and to send a message about the importance of preventing corporate crime.
(E) Because the need to take detection ratios into account makes reckoning cost and benefit impractical as the sole basis for determining penalties for corporate crimes, another method of determining the penalties must be found to supplement such reckoning.

2) The primary purpose of the passage is to

A) criticize courts for their leniency in punishing corporate crime
(B) describe some of the reasons corporations engage in corporate crime
(C) condemn corporations for failing to consider the moral implications of their actions
(D) argue against some economists' view of how to penalize corporate crime
(E) urge the implementation of a specific proposal for penalizing corporate crime

3) Suppose a corporation is convicted of a crime having a detection ratio of l-in-10. Based on the passage, the author would be most likely to endorse which one of the following penalties

(A) a fine exactly equal to the corporation's profit from committing the crime
(B) a fine slightly higher than the corporation's profit from committing the crime
(C) a fine enough higher than the corporation's profit from committing the crime to demonstrate community opinion of the crime without putting the corporation out of business
(D) a fine determined by taking the corporation's profit from committing the crime and raising it tenfold in order to reflect the detection ratio
(E) a fine high enough to put the corporation out of business

4)The author ascribes which one of the following views to the economists discussed in the passage?

(A community's moral judgment of certain corporate crimes is most reliable when the crime in question endangers the community as a whole.
(B) A community's moral judgment of certain corporate crimes is only occasionally useful in determining penalties for such crimes.
(C) A community's moral judgment of certain corporate crimes is often more severe than the penalties levied against such crimes.
(D) A community's moral judgment of certain corporate crimes is irrelevant to assessing the morality of corporations that commit the crimes.
(E) A community's moral judgment of certain corporate crimes is inappropriate in determining penalties for such crimes.

5)Which one of the following most accurately represents the organization of the passage?

(A) A question is raised; one answer to the question is summarized; an important aspect of this answer is presented; a flaw in the answer is identified; the need for an alternative answer is affirmed.
(B) A problem is posed; one solution to the problem is summarized; a view held by those who favor the solution is presented; a criticism of the solution is identified; the criticism is evaluated and rejected.
(C) A view is summarized; the ethics of those who hold the view are discussed; a flaw in the ethics of those holding the view is identified and described in detail; the view is rejected; an alternative view is offered.
(D) A question is raised; two answers to the question are identified and compared; an assumption underlying each answer is identified; the assumption of one answer is found to be incorrect and this answer is rejected.
(E) A problem is posed; the consequences of failing to solve the problem are described; one solution to the problem is suggested; an objection to this solution is described; the proposed solution is rejected.

6) With which one of the following statements would the economists discussed in the passage be most likely to agree?

(A) The possibility of a corporation's going out of business should not be a factor in determining the size of the penalty levied against the corporation for committing a crime.
(B) The community's opinion of the moral offensiveness of a corporate crime should not be a factor in assigning a moral weight to that crime.
(C) The moral offensiveness of a corporate crime should not be a factor in determining the penalty levied against the corporation unless it tends to increase the size of the penalty.
(D) The likelihood of a corporation's recommitting a particular crime should be the main factor in determining the size of the penalty levied against the corporation for committing the crime.
(E) The penalty levied against a corporation for a particular crime should increase in direct relation to the number of times the corporation has previously been convicted of the crime.

Official LSAT Preptest- 77

Q6--> I chose (D) over (A)...can you please explain why (D) is wrong?
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Posts: 630
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Re: How severe should the punishment be for a corporate crime  [#permalink]

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19 Feb 2019, 23:31
Ritwick91

suport to optinon A : "A true reckoning of cost and benefit would therefore have to take estimated detection ratios into account, but this means that, in the above scenario, if the profit resulting from a crime were \$6 million, the penalty would have to be not \$7 million but at least \$60 million, according to the economists' definition, to be just."
The econmists suggest that ONLY reckoning of costs and benefit should be used for penalty !!
BUt author says in the above lines is that if we only consider cost and benefit "the sum total penalty" would literally sky rocket "not 7 million but 60 million" becasue we are considering the detection rate and the passage says that detection rate is inversely proportional to penalty amount..so if 1 in 10 cases are found then the penalty would be even more severe !!! ... This according to author might screw the corportaion and kick it out of business !!...BUT according to the economists "6o million dollar fine" is JUSTICE ...hence we can conclude that economists do not take into account the possibility of a business getting completely screwed/going outta business !!!

Whereas for option D : The likelihood of a corporation's recommitting a particular crime should be the main factor in determining the size of the penalty levied against the corporation for committing the crime.

Firstly te economits do no list certain factors and then point out the "main factor"
secondly , economitss are only talking about what parameter shoud be considered for penalty !!
discouraging the corporations from "recommiitting a certain crime" is not the motive of the economists. They are solely concerend with assessing the amount of penalty and not why there should be penalty !!!

Additionally, option D can be argued as the POV economists ascribe to the community (dicsussed in 2nd para) who ant to send a message and hope to curb the crimes !!!

If the doubt still persists please let me know !!
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Joined: 20 Sep 2016
Posts: 630
Location: India
Concentration: Strategy, Operations
GPA: 3.95
WE: Operations (Real Estate)
Re: How severe should the punishment be for a corporate crime  [#permalink]

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19 Feb 2019, 23:49
Para 1: question
solution by eco
explanation of soltuion

Keywords: "Some ecos" , " sole basis" , "justice"

para2 : discussing eco's POV
penalty = earnings> moral

keywords :"community" "not considered"

Para3 :
solution impractical
why impractical
consuider detection rate
negative consequence : overall company would not be discouraged

keyqords: impractical , not impossible, assume, more profitable

para 4:
the solution has to take into accunt Det ratio
consequences = too much penalty
for eco this is "justice"

keywords : true reckoning , "just"

para 5:
one more probelm in solution :assumption of det ratio to be high
consequence screw company
author's suggestion : some other para alog with the recokoning

keywords : requires , high enugh, astronomical, other criteria

main point : solution provided by ecos has many drawbacks when "det ratio" is considered. Hence, some other para along with ecos idea has to be taken !!
Quote:
1)Which one of the following most accurately captures the main point of the passage?

(A) Because not all corporate crimes are detected, courts must supplement the reckoning of cost and benefit by taking detection ratios into account when determining penalties for such crimes if the penalties are to be both practical and fair.
- the main point is not what court should consider , the main point is to the solution provided for the more general quetion !!

(B) The reckoning of cost and benefit as the sole basis for determining penalties for corporate crimes would be an appropriate means of assessing such penalties if it took estimated detection ratios into account.
- after considering det ratios the penalties acoording to reckoning of costs would still be mammoth !! (Read last line) author says consider something ELSE along with these 2

(C) Because they argue that the reckoning of cost and benefit should be the sole basis for determining penalties for corporate crimes, economists do an injustice to communities that believe that the penalties must affect not only corporate earnings but corporate morality.
- opposite !! communities believe the penalty shoudl be more moral !!

(D) Because it does not take detection ratios into account, the reckoning of cost and benefit as the sole basis for determining penalties for corporate crimes results in penalties that are not high enough both to satisfy community moral standards and to send a message about the importance of preventing corporate crime.
- again opposite !! if detection ratio is taken into account then the morals are co mpletely screwed and "company would go out of business" . This is only talking about the third para !!

(E) Because the need to take detection ratios into account makes reckoning cost and benefit impractical as the sole basis for determining penalties for corporate crimes, another method of determining the penalties must be found to supplement such reckoning.
- CORRECT : reconing is impractical !! why?? consider detection ratio !! ..author at the end conludes we need another method !!!
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Re: How severe should the punishment be for a corporate crime  [#permalink]

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20 Feb 2019, 00:12
Ritwick91

suport to optinon A : "A true reckoning of cost and benefit would therefore have to take estimated detection ratios into account, but this means that, in the above scenario, if the profit resulting from a crime were \$6 million, the penalty would have to be not \$7 million but at least \$60 million, according to the economists' definition, to be just."
The econmists suggest that ONLY reckoning of costs and benefit should be used for penalty !!
BUt author says in the above lines is that if we only consider cost and benefit "the sum total penalty" would literally sky rocket "not 7 million but 60 million" becasue we are considering the detection rate and the passage says that detection rate is inversely proportional to penalty amount..so if 1 in 10 cases are found then the penalty would be even more severe !!! ... This according to author might screw the corportaion and kick it out of business !!...BUT according to the economists "6o million dollar fine" is JUSTICE ...hence we can conclude that economists do not take into account the possibility of a business getting completely screwed/going outta business !!!

Whereas for option D : The likelihood of a corporation's recommitting a particular crime should be the main factor in determining the size of the penalty levied against the corporation for committing the crime.

Firstly te economits do no list certain factors and then point out the "main factor"
secondly , economitss are only talking about what parameter shoud be considered for penalty !!
discouraging the corporations from "recommiitting a certain crime" is not the motive of the economists. They are solely concerend with assessing the amount of penalty and not why there should be penalty !!!

Additionally, option D can be argued as the POV economists ascribe to the community (dicsussed in 2nd para) who ant to send a message and hope to curb the crimes !!!

If the doubt still persists please let me know !!

Got it...thanks...i got confused between the economist's view and the author's view. The later is concerned about corporations going out of business which made me chose option D. ?

Thanks for the explanation.

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Re: How severe should the punishment be for a corporate crime   [#permalink] 20 Feb 2019, 00:12
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