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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, 05:19
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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.


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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, 05:43
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.


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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, 23:06
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 21 Jun 2018, 01:27
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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.


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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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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, 01:49
1
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, 18:04.
Last edited by aragonn on 22 Jun 2018, 01:49, edited 1 time in total.
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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, 21:26
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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Originally posted by GyMrAT on 21 Jun 2018, 23:01.
Last edited by GyMrAT on 06 Jul 2018, 21:26, 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 22 Jun 2018, 01:56
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, 21:17
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, 21:51
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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More and more law firms specializing in corporate taxes are paid on a [#permalink]

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New post 22 Jun 2018, 22:31
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, 23:49
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.


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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, 11:07
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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