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More and more law firms specializing in corporate taxes are paid on a

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More and more law firms specializing in corporate taxes are paid on a  [#permalink]

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New post 20 Jun 2018, 04:19
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More and more law firms specializing in corporate taxes are paid on a contingency-fee basis. Under this arrangement, if a case is won, the firm usually receives more than it would have received if it had been paid on the alternate hourly rate basis. If the case is lost, the firm receives nothing. Most firms are likely to make more under the contingency-fee arrangement.

Which of the following, if true, would most strengthen the prediction above?


(A) Firms that work exclusively under the hourly rate arrangement spend, on average, fewer hours on cases that are won than on cases that are lost.

(B) Some litigation can last for years before any decision is reached, and, even then, the decision may be appealed.

(C) Firms under the contingency-fee arrangement still pay their employees on an hourly basis.

(D) Since the majority of firms specialize in certain kinds of cases, they are able to assess accurately their chances of winning each potential case.

(E) Firms working under the contingency-fee arrangement take in fewer cases per year than do firms working under the hourly rate arrangement.


NEW question from GMAT® Official Guide 2019


(CR01102)

Step 1: Identify the Question

The word strengthen in the question stem indicates that this is a Strengthen the Argument question.

Step 2: Deconstruct the Argument

Cont. fee: firm wins case → more $ than hourly

Lose case → no $

© most firms Cont. fee $ > hourly $

The argument describes the way in which a law firm’s earnings are determined under a contingency-fee arrangement. (The alternative arrangement is an hourly rate.) If the firm wins the case, it earns more money than it otherwise would; if it loses, it earns nothing. The author concludes that most firms will make more money under this arrangement. Note that this relies on an assumption: that the extra money the firms make by winning cases will outweigh the potential money they lose by losing cases.

Step 3: Pause and State the Goal

On Strengthen the Argument questions, the right answer will make the conclusion more likely to be correct. In this case, the right answer will suggest that law firms will, in fact, earn more money by charging a contingency fee.

Step 4: Work from Wrong to Right

(A) This answer choice compares two scenarios under the hourly rate arrangement. However, it does not provide any information about what happens under the contingency fee arrangement. The right answer must suggest that earnings will be higher under the contingency fee arrangement, so it needs to provide some information about what happens under this arrangement as well.

(B) This answer choice does not give any information about law firms’ earnings, regardless of the fee arrangement. Litigation lasting for years might result in either a win or a loss, and might result in a higher or lower fee for the firm, regardless of fee structure.

(C) This answer choice explains the way that employees are paid. However, the argument is concerned with how much the firms earn, so their costs do not affect the argument.

(D) CORRECT. The argument assumes that the firms will gain more by winning cases than they will lose by losing cases. This answer choice suggests that the assumption is correct: since firms can tell which cases they’re likely to win, they can choose to only take those cases, which makes it very likely that their earnings will outweigh their losses.

(E) This statement only affects the conclusion if certain outside assumptions are made. If firms with fewer cases make less money, the answer choice suggests that switching to a contingency fee might reduce earnings. However, this is the opposite of what the right answer should do. Also, the right answer will never require additional assumptions to affect the conclusion.

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Re: More and more law firms specializing in corporate taxes are paid on a  [#permalink]

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New post 21 Jun 2018, 00:27
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Bunuel wrote:
More and more law firms specializing in corporate taxes are paid on a contingency-fee basis. Under this arrangement, if a case is won, the firm usually receives more than it would have received if it had been paid on the alternate hourly rate basis. If the case is lost, the firm receives nothing. Most firms are likely to make more under the contingency-fee arrangement.

Which of the following, if true, would most strengthen the prediction above?


A. Firms that work exclusively under the hourly rate arrangement spend, on average, fewer hours on cases that are won than on cases that are lost.

B. Some litigation can last for years before any decision is reached, and, even then, the decision may be appealed.

C. Firms under the contingency-fee arrangement still pay their employees on an hourly basis.

D. Since the majority of firms specialize in certain kinds of cases, they are able to assess accurately their chances of winning each potential case.

E. Firms working under the contingency-fee arrangement take in fewer cases per year than do firms working under the hourly rate arrangement.


NEW question from GMAT® Official Guide 2019


(CR01102)


Question Type: Strengthen

Premise: More and more law firms are paid on a contingency-fee basis rather than hourly rate basis. If a case is won, the firm receives higher compensation than hourly rate basis & if the case is lost, they get nothing.

Conclusion: Most firms are likely to make more under the contingency-fee arrangement.

Analysis: The tone of the argument, is very generalized, as is evident from the usage of "More & More" & "Most", hence a correct answer will also be on the same lines. A strengthener, should either show that the firms, which use the contingency fee arrangement, to avert the risk of loosing, are certain of winning & have done due diligence to avoid loss, before accepting a case. A strengthener could also show that hourly rate makes less money for the firms than contingency fee arrangement.

A. Firms that work exclusively under the hourly rate arrangement spend, on average, fewer hours on cases that are won than on cases that are lost. Incorrect. Weakens the argument, as cases lost still make more money than cases won, due to hourly rate.

B. Some litigation can last for years before any decision is reached, and, even then, the decision may be appealed. Incorrect. Hourly rate will make more money for the firm.

C. Firms under the contingency-fee arrangement still pay their employees on an hourly basis. Incorrect. Out of scope.

D. Since the majority of firms specialize in certain kinds of cases, they are able to assess accurately their chances of winning each potential case. Correct. As per analysis, that firms do due diligence before accepting a case. The tone is generalized just as the argument.

E. Firms working under the contingency-fee arrangement take in fewer cases per year than do firms working under the hourly rate arrangement. Incorrect. Irrelevant

Answer D.

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Re: More and more law firms specializing in corporate taxes are paid on a  [#permalink]

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New post 20 Jun 2018, 04:43
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Ans: D {IMO}

as argument concludes "Most firms are likely to make more under the contingency-fee arrangement" to strengthen this we need something which hints that firms are going to win the cases because only then they will earn. from D it becomes clear that because They can access the chances of winning they will take only those cases which they believe they can win and in return earn more. Thus D strengthen the prediciton.

Ans: D
Bunuel wrote:
More and more law firms specializing in corporate taxes are paid on a contingency-fee basis. Under this arrangement, if a case is won, the firm usually receives more than it would have received if it had been paid on the alternate hourly rate basis. If the case is lost, the firm receives nothing. Most firms are likely to make more under the contingency-fee arrangement.

Which of the following, if true, would most strengthen the prediction above?


A. Firms that work exclusively under the hourly rate arrangement spend, on average, fewer hours on cases that are won than on cases that are lost.

B. Some litigation can last for years before any decision is reached, and, even then, the decision may be appealed.

C. Firms under the contingency-fee arrangement still pay their employees on an hourly basis.

D. Since the majority of firms specialize in certain kinds of cases, they are able to assess accurately their chances of winning each potential case.

E. Firms working under the contingency-fee arrangement take in fewer cases per year than do firms working under the hourly rate arrangement.


NEW question from GMAT® Official Guide 2019


(CR01102)

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Re: More and more law firms specializing in corporate taxes are paid on a  [#permalink]

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New post 20 Jun 2018, 22:06
IMO D.

If firms can predict "accurately" their chances of winning cases, then they can definitely make more money by working on contingency payment basis.
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Re: More and more law firms specializing in corporate taxes are paid on a  [#permalink]

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New post Updated on: 22 Jun 2018, 00:49
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Pre-thinking:
This question is all about contingency-fee basis vs hourly basis charge. Let say on winning a case and charging hourly a firm is getting $5000 and while in CF firm is charging $10000. However in case of losing, a firm is still charging hourly basis and getting let say $5000, but in case of CF firm is not getting anything at all. As conclusion in saying firm is making more under CF, few assumptions has to be made.
1. firms' expenditures are same in both cases.
2. in CF it is able to take care of its loses too, even if it is loosing 50%, it is taking care of it.
3. losing % should be almost equal in both cases, they have thought of it prior and accordingly charging in CF.


A. Firms that work exclusively under the hourly rate arrangement spend, on average, fewer hours on cases that are won than on cases that are lost. --- This is making no impact on conclusion, as it is not even talking about CF.

B. Some litigation can last for years before any decision is reached, and, even then, the decision may be appealed. ---- in this case Hourly one will get more money.

C. Firms under the contingency-fee arrangement still pay their employees on an hourly basis. ---- This seems a very good choice. this makes the expenditure in both cases fixed. In CF firm is anyways getting more money than hourly basis is. so firm will be more profitable.

D. Since the majority of firms specialize in certain kinds of cases, they are able to assess accurately their chances of winning each potential case. --- problem with this choice is that 1. it is not talking about CF or hourly basis. 2. it is saying chances People lose simple open and shut cases. I think it is making huge assumption here that accurately assess will make them win. what if they did this in all let say 100 cases and loose them all or win only 10.

E. Firms working under the contingency-fee arrangement take in fewer cases per year than do firms working under the hourly rate arrangement. ---- not affecting conclusion.

I think C should be the best choice.
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Originally posted by aragonn on 21 Jun 2018, 17:04.
Last edited by aragonn on 22 Jun 2018, 00:49, edited 1 time in total.
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Re: More and more law firms specializing in corporate taxes are paid on a  [#permalink]

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New post Updated on: 06 Jul 2018, 20:26
aragonn wrote:
Pre-thinking:
This question is all about contingency-fee basis vs hourly basis charge. Let say on winning a case and charging hourly a firm is getting $5000 and while in CF firm is charging $10000. However in case of losing, a firm is still charging hourly basis and getting let say $5000, but in case of CF firm is not getting anything at all. As conclusion in saying firm is making more under CF, few assumptions has to be made.
1. firms' expenditures are same in both cases.
2. in CF it is able to take care of its loses too, even if it is loosing 50%, it is taking care of it.
3. losing % should be almost equal in both cases, they have thought of it prior and accordingly charging in CF.


A. Firms that work exclusively under the hourly rate arrangement spend, on average, fewer hours on cases that are won than on cases that are lost. --- This is making no impact on conclusion, as it is not even talking about CF.

B. Some litigation can last for years before any decision is reached, and, even then, the decision may be appealed. ---- in this case Hourly one will get more money.

C. Firms under the contingency-fee arrangement still pay their employees on an hourly basis. ---- This seems a very good choice. this makes the expenditure in both cases a fixed. In CF firm is anyways getting more money than hourly basis is. so firm will be more profitable.

D. Since the majority of firms specialize in certain kinds of cases, they are able to assess accurately their chances of winning each potential case. --- problem with this choice is that 1. it is not talking about CF or hourly basis. 2. it is saying chances People lose simple open and shut cases. I think it is making huge assumption here that accurately assess will make them win. what if they did this in all let say 100 cases and loose them all or win only 10.

E. Firms working under the contingency-fee arrangement take in fewer cases per year than do firms working under the hourly rate arrangement. ---- not affecting conclusion.

I think C should be the best choice.


aragonn valid points, I agree with your explanation.


Good learning from your analysis.



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Re: More and more law firms specializing in corporate taxes are paid on a  [#permalink]

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New post 22 Jun 2018, 00:56
I also went with C initially. Can someone explain the logic behind choosing D over C ?
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Re: More and more law firms specializing in corporate taxes are paid on a  [#permalink]

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New post 22 Jun 2018, 20:17
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More and more law firms specializing in corporate taxes are paid on a contingency-fee basis. Under this arrangement, if a case is won, the firm usually receives more than it would have received if it had been paid on the alternate hourly rate basis. If the case is lost, the firm receives nothing. Most firms are likely to make more under the contingency-fee arrangement.

Type- Strengthen
Conclusion - Most firms are likely to make more under the contingency-fee arrangement.

A. Firms that work exclusively under the hourly rate arrangement spend, on average, fewer hours on cases that are won than on cases that are lost.- Irrelevant - Does not talk about
contingency-fee arrangement.

B. Some litigation can last for years before any decision is reached, and, even then, the decision may be appealed. -- Irrelevant

C. Firms under the contingency-fee arrangement still pay their employees on an hourly basis. -- Incorrect - Okay, but does this statement tells anything about whether firms will win more now? What if most of these firms started losing most of its cases

D. Since the majority of firms specialize in certain kinds of cases, they are able to assess accurately their chances of winning each potential case.- Correct -- So the firms under the contingency-fee arrangement are likely to take only those cases in which they assess a higher winning potential.

E. Firms working under the contingency-fee arrangement take in fewer cases per year than do firms working under the hourly rate arrangement. -- Incorrect -- So the firms might focus on a fewer number of cases but it does not tell anything about the likelihood of success

Answer D
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Re: More and more law firms specializing in corporate taxes are paid on a  [#permalink]

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New post 22 Jun 2018, 20:51
Skywalker18 wrote:
More and more law firms specializing in corporate taxes are paid on a contingency-fee basis. Under this arrangement, if a case is won, the firm usually receives more than it would have received if it had been paid on the alternate hourly rate basis. If the case is lost, the firm receives nothing. Most firms are likely to make more under the contingency-fee arrangement.

Type- Strengthen
Conclusion - Most firms are likely to make more under the contingency-fee arrangement.

A. Firms that work exclusively under the hourly rate arrangement spend, on average, fewer hours on cases that are won than on cases that are lost.- Irrelevant - Does not talk about
contingency-fee arrangement.

B. Some litigation can last for years before any decision is reached, and, even then, the decision may be appealed. -- Irrelevant

C. Firms under the contingency-fee arrangement still pay their employees on an hourly basis. -- Incorrect - Okay, but does this statement tells anything about whether firms will win more now? What if most of these firms started losing most of its cases

D. Since the majority of firms specialize in certain kinds of cases, they are able to assess accurately their chances of winning each potential case.- Correct -- So the firms under the contingency-fee arrangement are likely to take only those cases in which they assess a higher winning potential.

E. Firms working under the contingency-fee arrangement take in fewer cases per year than do firms working under the hourly rate arrangement. -- Incorrect -- So the firms might focus on a fewer number of cases but it does not tell anything about the likelihood of success

Answer D


So regarding you opinion on C I have a doubt, You are saying it is possible that if firms are using CF then they will loose more or other case.
i think we have to say that CF or H result of the cases if not depending on it. Also this reasoning can be given in anycase that they will not win after this for next 100 cases in that case no one/no situation can make them profitable. a decent amount of win have to be considered to make this firm profitable. Also one more thing about D, if firms are specialize in certain type why not mix it with hourly thing. why mix it only with CF. this choice is not saying any thing about this.However if this choice would have said that only with CF they are using this thinking then it would have made complete sense.
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Re: More and more law firms specializing in corporate taxes are paid on a  [#permalink]

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New post 22 Jun 2018, 21:31
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aragonn wrote:
Skywalker18 wrote:
More and more law firms specializing in corporate taxes are paid on a contingency-fee basis. Under this arrangement, if a case is won, the firm usually receives more than it would have received if it had been paid on the alternate hourly rate basis. If the case is lost, the firm receives nothing. Most firms are likely to make more under the contingency-fee arrangement.

Type- Strengthen
Conclusion - Most firms are likely to make more under the contingency-fee arrangement.

A. Firms that work exclusively under the hourly rate arrangement spend, on average, fewer hours on cases that are won than on cases that are lost.- Irrelevant - Does not talk about
contingency-fee arrangement.

B. Some litigation can last for years before any decision is reached, and, even then, the decision may be appealed. -- Irrelevant

C. Firms under the contingency-fee arrangement still pay their employees on an hourly basis. -- Incorrect - Okay, but does this statement tells anything about whether firms will win more now? What if most of these firms started losing most of its cases ---These firms would have lost the majority of the cases irrespective of the billing model

D. Since the majority of firms specialize in certain kinds of cases, they are able to assess accurately their chances of winning each potential case.- Correct -- So the firms under the contingency-fee arrangement are likely to take only those cases in which they assess a higher winning potential.

E. Firms working under the contingency-fee arrangement take in fewer cases per year than do firms working under the hourly rate arrangement. -- Incorrect -- So the firms might focus on a fewer number of cases but it does not tell anything about the likelihood of success

Answer D


So regarding you opinion on C I have a doubt, You are saying it is possible that if firms are using CF then they will loose more or other case.
i think we have to say that CF or H result of the cases if not depending on it. Also this reasoning can be given in anycase that they will not win after this for next 100 cases in that case no one/no situation can make them profitable. a decent amount of win have to be considered to make this firm profitable. Also one more thing about D, if firms are specialize in certain type why not mix it with hourly thing. why mix it only with CF. this choice is not saying any thing about this.However if this choice would have said that only with CF they are using this thinking then it would have made complete sense.


Hi aragonn,

C. Firms under the contingency-fee arrangement still pay their employees on an hourly basis. -- What if most firms under contingency-fee arrangement would have lost the majority of irrespective of the billing model. Then on the contrary, the contingency-fee arrangement might have a negative impact on profitability.

Firms need to pay the employees irrespective of employee's performance.

D. Since the majority of firms specialize in certain kinds of cases, they are able to assess accurately their chances of winning each potential case. -- In the hourly arrangement, firms DON'T have an incentive to pick ONLY those cases that they are likely to win since they will be paid irrespective of winning or losing the case

Since the billing is per hour basis, the firms under such arrangement will pick all cases possible(Let's ignore the assumption of the adverse effect of losing a case on firms reputation)
But under contingency-fee arrangement, a firm is likely to pick ONLY those cases in which it is likely to WIN (Under CF if a case is won, the firm usually receives more than it would have received if it had been paid on the alternate hourly rate basis. )

Say a firm gets 100 cases, so it will have
= number of cases it wins + number of cases it loses ( wins and loses can take any value from 0-100 )

In contingency-fee arrangement , the firm will try to take ONLY those cases which they are likely to WIN since they WON'T be paid anything for losing one.
D tells us that majority of firms can accurately asses their chances of winning potential cases.
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Re: More and more law firms specializing in corporate taxes are paid on a  [#permalink]

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New post 22 Jun 2018, 22:49
Bunuel wrote:
More and more law firms specializing in corporate taxes are paid on a contingency-fee basis. Under this arrangement, if a case is won, the firm usually receives more than it would have received if it had been paid on the alternate hourly rate basis. If the case is lost, the firm receives nothing. Most firms are likely to make more under the contingency-fee arrangement.

Which of the following, if true, would most strengthen the prediction above?


A. Firms that work exclusively under the hourly rate arrangement spend, on average, fewer hours on cases that are won than on cases that are lost.

B. Some litigation can last for years before any decision is reached, and, even then, the decision may be appealed.

C. Firms under the contingency-fee arrangement still pay their employees on an hourly basis.

D. Since the majority of firms specialize in certain kinds of cases, they are able to assess accurately their chances of winning each potential case.

E. Firms working under the contingency-fee arrangement take in fewer cases per year than do firms working under the hourly rate arrangement.


NEW question from GMAT® Official Guide 2019


(CR01102)



Argument: Under contingency mode of payment, winning a case would mean greater earnings for the firm than it would have had it opted for an hourly method of payment. However, losing a case would result in no payment. Therefore, more firms are likely to make more money in the contingency mode.

Prethinking: If I ran a law firm and I would be opting for contingency-fee arrangement, I'd be rather sure of winning the case. Else it would be a great risk for me!

A. Firms that work exclusively under the hourly rate arrangement spend, on average, fewer hours on cases that are won than on cases that are lost. This does not have much impact on the argument. If anything, this goes in the opposite direction. If firms are paid on hourly basis and the firm spends more hours on cases that are lost, the firm is making more money on cases lost than on cases won. Then why would it switch to contingency mode?

B. Some litigation can last for years before any decision is reached, and, even then, the decision may be appealed.This goes in the opposite direction. Delay in decisions means a delay in payment to the firms(firms are paid only when the case is won under the contingency scheme)

C. Firms under the contingency-fee arrangement still pay their employees on an hourly basis.We are talking about how much firms would make not what they do with this payment. I mean, ok this answer choice says employees would be happy, but again gives us no reason why are companies preferring the contingency arrangement.

D. Since the majority of firms specialize in certain kinds of cases, they are able to assess accurately their chances of winning each potential case.Ahh..this is good and in line with the pre-thinking. If I can accurately asses the risk beforehand, I will choose only the cases in which I have high chances of winning. And in each of these cases I would make more than I would have had I chosen the hourly method.

E. Firms working under the contingency-fee arrangement take in fewer cases per year than do firms working under the hourly rate arrangement.Number of cases has nothing to do with why I would choose one over the other. Eliminate.
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Re: More and more law firms specializing in corporate taxes are paid on a  [#permalink]

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New post 06 Jul 2018, 10:07
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More and more law firms specializing in corporate taxes are paid on a contingency-fee basis. Under this arrangement, if a case is won, the firm usually receives more than it would have received if it had been paid on the alternate hourly rate basis. If the case is lost, the firm receives nothing. Most firms are likely to make more under the contingency-fee arrangement.

Which of the following, if true, would most strengthen the prediction above?

A. Firms that work exclusively under the hourly rate arrangement spend, on average, fewer hours on cases that are won than on cases that are lost.
B. Some litigation can last for years before any decision is reached, and, even then, the decision may be appealed.
C. Firms under the contingency-fee arrangement still pay their employees on an hourly basis.
D. Since the majority of firms specialize in certain kinds of cases, they are able to assess accurately their chances of winning each potential case.
E. Firms working under the contingency-fee arrangement take in fewer cases per year than do firms working under the hourly rate arrangement.

Question Type: Strengthen
BID (Boil It Down): Contingent = Bigger payout if won; Nothing if lost -> Firms make more with Contingent
Conclusion: Most firms make more money under the contingency fee arrangement using an hourly rate basis.
Evidence: All we are told is that firms usually make more money if they win a case under the contingency arrangement if they win, but make nothing if they lose.
Missing Information (Assumption): The gain from the additional payout if won is enough to compensate for the cases lost for most firms.
Goal: Find the option that helps prove that the gain from the additional payout if won is enough to compensate for the cases lost for most firms.

Choice D is correct. This tells us that firms can be choosy, selecting only those cases that they are likely to win. This way they won’t suffer too many losses, which helps reinforce the assumption that the added gains will help make up for the loss in revenue for lost cases. Otherwise, if they DID suffer many losses, then the hourly rate basis would make more sense.

Choice A makes an irrelevant comparison. Option A does not address the contingency arrangement and a comparison in hours spent isn’t clear to the logic of the argument.

Choice B states that “some” cases can last years, but, if anything, this supports choosing the hourly rate basis, so this option is a 180 in that regard.

Choice C is irrelevant. This option has no impact on the conclusion. The information in the prompt suggests if workers are paid hourly in contingency arrangements doing so wouldn’t impede firms’ ability to generate outsized pay.

Choice E is an irrelevant comparison. A comparison of the number of cases handled by the two types of firms does not support the idea that one arrangement is more profitable than the other. Thus this option neither strengthens nor weakens the argument.

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Re: More and more law firms specializing in corporate taxes are paid on a  [#permalink]

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New post 06 Aug 2018, 08:12
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Please help with my argument understanding and PoE.

Quote:
Which of the following, if true, would most strengthen the prediction above?

There is a prediction in argument that I need to strengthen.

Quote:
More and more law firms specializing in corporate taxes are paid on a contingency-fee basis. Under this arrangement, if a case is won, the firm usually receives more than it would have received if it had been paid on the alternate hourly rate basis. If the case is lost, the firm receives nothing. Most firms are likely to make more under the contingency-fee arrangement.


Increasing amount of law firms are being paid on contingency-fee basis.
Author further goes on to explain what does contingency-fee basis mean.


Case won = More $$$ / hour spent for case.
Case lost = 0 $

With this arrangement more $$$ for law firms.
So basically I am looking out for higher ratio of won vs lost cases.

Quote:
A. Firms that work exclusively under the hourly rate arrangement spend, on average, fewer hours on cases that are won than on cases that are lost.

Why I selected this?
Comparision is between time spent on cases that are won than those are lost.
Also it is mentioned that former cases (ie won) are more since
no of hours spent on these cases are fewer than ones spent on lost.
Clearly more $$$ for law firms.

Quote:
B. Some litigation can last for years before any decision is reached, and, even then, the decision may be appealed.

If decisions are delayed then profits are hampered for law firms. OUT

Quote:
C. Firms under the contingency-fee arrangement still pay their employees on an hourly basis.

Where is WON vs LOST ratio here? Irrelevant .

Quote:
D. Since the majority of firms specialize in certain kinds of cases, they are able to assess accurately their chances of winning each potential case.

I could not link underlined text to context of the argument.


Quote:
E. Firms working under the contingency-fee arrangement take in fewer cases per year than do firms working under the hourly rate arrangement.

hmm, cool. But are these cases won or lost?? We do not know, hence this choice is out.
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New post 06 Aug 2018, 09:55
adkikani:

Let's break down A vs. D

A. Firms that work exclusively under the hourly rate arrangement spend, on average, fewer hours on cases that are won than on cases that are lost. -- Does it matter if they win or lose in this case? Nope. Either way they get paid the same amount, so it doesn't matter about winning vs. losing.

D. Since the majority of firms specialize in certain kinds of cases, they are able to assess accurately their chances of winning each potential case. -- Ah, here we are told that the firms knows if they will win. So if they have a strong idea that they will lose, they will not take the case because they will not be paid. This is our answer.
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New post 06 Aug 2018, 16:31
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adkikani,

i think, your understanding of argument is little different. See what argument says:

More and more law firms specializing in corporate taxes are paid on a contingency-fee basis. Under this arrangement, if a case is won, the firm usually receives more than it would have received if it had been paid on the alternate hourly rate basis. If the case is lost, the firm receives nothing. Most firms are likely to make more under the contingency-fee arrangement

As per argument:
1. More number of law firms specialized in corporate taxes are paid on contingency fee basis.
2. Contingency fee basis= If case is won, Firm will receive money else firm receives nothing.
3. Alternate Hourly Basis= Firm receives money on hourly basis as long as case is running.
4. As compare to Hourly basis, Firms receives more money in Contingency fee arrangement if case is won.

Conclusion/Claim: Most firms are likely to make more money under Contingency fee arrangement

Now you have to strengthen the argument. How can we strengthen argument? See scope of passage. We have to support contingency fee arrangement.

Option A says
Quote:
Firms that work exclusively under the hourly rate arrangement spend, on average, fewer hours on cases that are won than on cases that are lost.

-- Hourly rate arrangement is making money in any case (won or lost). Under this arrangement, if some firm won case in 40 hours they will get paid for 40 hours. If that firm lose case in 80 hours, it will get paid for 80 hours. It is just explaining "Hourly fee arrangement" but not helping for "contingency fee arrangement"

Option D:

Quote:
Since the majority of firms specialize in certain kinds of cases, they are able to assess accurately their chances of winning each potential case.


As per passage under "contingency fee arrangement" firms get more money. So if firm already knows that it will win case then obviously firm will go for "contingency fee arrangement" because it will be getting more money from this arrangement.

Take an example of property which is worth of $10 million. Some firm knows that if it run case, it will win case.
Situation 1: if you run case and u win case then u will get 10% of property value. If u lose case u wont get anything. (Contingency Fee Arrangement)
Situation 2: if you run case under hourly fee arrangement, u lose it or win it, your fee is $200 per hour. No matter what will be the result but you will be paid hourly.

Which arrangement u would like to chose ?
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New post 05 Oct 2019, 09:36
my logic :

let us compare both the hourly payment method and the contingency payment method.

as per the hourly payment method, there is a payment guarantee as winning or losing doesn't really matter.

as per the contingency payment method, winning is what matters. Income is directly proportional to winning cases.

conclusion : law firms are likely to generate more income via the contingency payment method.

basic assumption made by the author is that these law firms are going to win more or at least they are more than capable or have what it takes to win most of the cases. Option D is on the same lines and is a perfect strengthener

PS. I know that there is a subtle difference between an assumption and a strengthener, but i feel that assumptions are like keys as they help us in breaking down the argument, touching the exact logic of the argument.

Open to suggestions/discussions............................ and KUDOS of course ! :D
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New post 10 Apr 2020, 00:23
Bunuel wrote:
More and more law firms specializing in corporate taxes are paid on a contingency-fee basis. Under this arrangement, if a case is won, the firm usually receives more than it would have received if it had been paid on the alternate hourly rate basis. If the case is lost, the firm receives nothing. Most firms are likely to make more under the contingency-fee arrangement.

Which of the following, if true, would most strengthen the prediction above?

(A) Firms that work exclusively under the hourly rate arrangement spend, on average, fewer hours on cases that are won than on cases that are lost.

(B) Some litigation can last for years before any decision is reached, and, even then, the decision may be appealed.

(C) Firms under the contingency-fee arrangement still pay their employees on an hourly basis.

(D) Since the majority of firms specialize in certain kinds of cases, they are able to assess accurately their chances of winning each potential case.

(E) Firms working under the contingency-fee arrangement take in fewer cases per year than do firms working under the hourly rate arrangement.


NEW question from GMAT® Official Guide 2019


(CR01102)

Step 1: Identify the Question

The word strengthen in the question stem indicates that this is a Strengthen the Argument question.

Step 2: Deconstruct the Argument

Cont. fee: firm wins case → more $ than hourly

Lose case → no $

© most firms Cont. fee $ > hourly $

The argument describes the way in which a law firm’s earnings are determined under a contingency-fee arrangement. (The alternative arrangement is an hourly rate.) If the firm wins the case, it earns more money than it otherwise would; if it loses, it earns nothing. The author concludes that most firms will make more money under this arrangement. Note that this relies on an assumption: that the extra money the firms make by winning cases will outweigh the potential money they lose by losing cases.

Step 3: Pause and State the Goal

On Strengthen the Argument questions, the right answer will make the conclusion more likely to be correct. In this case, the right answer will suggest that law firms will, in fact, earn more money by charging a contingency fee.

Step 4: Work from Wrong to Right

(A) This answer choice compares two scenarios under the hourly rate arrangement. However, it does not provide any information about what happens under the contingency fee arrangement. The right answer must suggest that earnings will be higher under the contingency fee arrangement, so it needs to provide some information about what happens under this arrangement as well.

(B) This answer choice does not give any information about law firms’ earnings, regardless of the fee arrangement. Litigation lasting for years might result in either a win or a loss, and might result in a higher or lower fee for the firm, regardless of fee structure.

(C) This answer choice explains the way that employees are paid. However, the argument is concerned with how much the firms earn, so their costs do not affect the argument.

(D) CORRECT. The argument assumes that the firms will gain more by winning cases than they will lose by losing cases. This answer choice suggests that the assumption is correct: since firms can tell which cases they’re likely to win, they can choose to only take those cases, which makes it very likely that their earnings will outweigh their losses.

(E) This statement only affects the conclusion if certain outside assumptions are made. If firms with fewer cases make less money, the answer choice suggests that switching to a contingency fee might reduce earnings. However, this is the opposite of what the right answer should do. Also, the right answer will never require additional assumptions to affect the conclusion.

After eliminating B, E and C, I was stuck with A and D. C, I rejected for the following reason but chose A as my answer.
(A) Firms that work exclusively under the hourly rate arrangement spend, on average, fewer hours on cases that are won than on cases that are lost. - Marked it correct since even if they lose their earnings are secure. It's because of POE that i marked this one not that i thought its a good answer.

(C) Firms under the contingency-fee arrangement still pay their employees on an hourly basis. - WRONG. Well it explains how a firm can save money as it is earning on hourly basis but nowhere it is compared with firms with CF arrangements. Can't really say anything about from here.

(D) Since the majority of firms specialize in certain kinds of cases, they are able to assess accurately their chances of winning each potential case. - Eliminated it because i was stuck with what 'certain kinds of cases' meant. Since argument it about corporate taxes, i took it otherwise plus 'accurately' also played on my mind(thought that it a large assumption to make) to not choose this as correct answer. Additionally, if the firm is working only on certain kind of cases then how it is badly likely to make money for there is 50-50 probability of losing a case. For one reason i thought it is against the argument because if majority of firms are specializing the firms with hourly arrangement would still be making more money if they lose(on winning a lot more). Hence firms with CF arrangement are not likely to make money.

Post attempt analysis:
I understand why A is incorrect(as i was not sure of it earlier also). D, on the other hand, is like road accident scenario.
- If roads are good in condition people are careless while driving and thus are more likely to meet an accident.
- If roads are bad in condition people are careful while driving and thus are less likely to meet an accident.

But, personally, I think the question is difficult since none of the options are comparing the firms having two different arrangements.
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Re: More and more law firms specializing in corporate taxes are paid on a  [#permalink]

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New post 29 May 2020, 02:30
Goal: Strengthen the Conclusion

Paraphrase: Talks about Law firms which specialize in Corporate Taxes are paid under contingency basis and they get paid more than the alternate hourly basis.

Conclusion: More firms make more money through CB.

Pre-thinking: Law firms Specialization + More Money + Contingency Fee Arrangement

a) It talks about how many hours a firm spends on cases they win than on those they lose. It provide new info which is not relevant to the Q asked.
b) This infact slightly weakens the conclusion.
c) New Info, which is not required to strengthen the Conclusion.
d) This clearly talks about those special cases, wherein the firm calculate the chance of winning the case.
e) This doesnt help strengthen the conclusion.

So, D is the answer
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New post 29 May 2020, 16:49
Under the contingency-fee plan, firms get paid

(i) more if they win
(i) nothing if they don't win

Conclusion: Most firms are likely to make more under the contingency-fee arrangement.

Which of the following, if true, would most strengthen the prediction above?


(A) Firms that work exclusively under the hourly rate arrangement spend, on average, fewer hours on cases that are won than on cases that are lost. - does not tell us anything about the contingency-fee plan. Hence, (A) is irrelevant to the conclusion. Therefore, eliminate (A)

(B) Some litigation can last for years before any decision is reached, and, even then, the decision may be appealed. - Irrelevant to the conclusion. Besides, it sort of weakens the chances of firms (that use the contingency-fee plan) to earn more money: What if such firms win cases and get paid lots of money only for those cases to go for retrial (if the appeal is approved). hence, eliminate (B)

(C) Firms under the contingency-fee arrangement still pay their employees on an hourly basis. - 'hourly basis' salary payments does not prove that the firms (that use the contingency-fee arrangement) will earn more money under such an arrangement. hence, eliminate (C)

(D) Since the majority of firms specialize in certain kinds of cases, they are able to assess accurately their chances of winning each potential case. - Well, if these firms are able to accurately assess their chances of winning each potential case, then we can reasonably infer that these firms would take up only those cases that they will win. When they do win, they get paid a large sum of money. (D) therefore strengthens the conclusion drawn. Hence, (D) is the right answer choice here.

(E) Firms working under the contingency-fee arrangement take in fewer cases per year than do firms working under the hourly rate arrangement. - 'Number of cases' still does not strengthen the conclusion drawn. Hence, eliminate (E)
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New post 31 May 2020, 06:26
Aadhitthyaa

Aadhitthyaa wrote:
I also went with C initially. Can someone explain the logic behind choosing D over C ?



(C) Firms under the contingency-fee arrangement still pay their employees on an hourly basis.

This choice is a trap as it will misguide you to dwell on the idea that firms under the contingency-fee arrangement can only pay their employees on an hourly basis if they make more money from winning cases, if they lose they will not be able to do so. But this is incorrect, as a firm can lose and still pay its employees at an hourly rate. The passage is about firms with contingency-fee arrangements making more money and not how they pay their employees.

(D) Since the majority of firms specialize in certain kinds of cases, they are able to assess accurately their chances of winning each potential case.

This choice essentially tells us that firms can choose the cases they would win, thereby making more money from contingency-fee arrangements. Thus, this is the correct answer.
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Re: More and more law firms specializing in corporate taxes are paid on a   [#permalink] 31 May 2020, 06:26

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