There are actually long-term benefits for Wall Street stockbrokers in

Question

There are actually long-term benefits for Wall Street stockbrokers in a rapidly falling stock market in which most investors are selling and many people are losing a great deal of money. After all, the volume of daily transactions rises dramatically in such a market, and the stockbrokers, who receive a commission on each sale, collect a windfall of commission income.

Which of the following, if true, would most seriously weaken the argument made above?

A. Some investors whose stocks are affected in a falling market have purchased their stocks on margin—i.e., on credit—and must complete payment at the full purchase price while their stocks are actually declining in value.

B. Many Wall Street stockbrokers sell not only stocks, but also bonds, money-market funds, and insurance-investments that might actually improve in value during a rapidly falling stock market.

C. Only ten percent of stock-buying and selling on Wall Street is conducted on behalf of individual investors; ninety percent is conducted on behalf of institutional investors.

D. After a rapidly falling market, relatively few stockbrokers give up stock-trading and leave Wall Street.

E. After a rapidly falling market, the volume of trading in the stock market generally declines and remains at a low level for an extended period of time.

CR16837

egmat · Accepted Answer

Passage Analysis

There are actually long-term benefits for Wall Street stockbrokers in a rapidly falling stock market in which most investors are selling and many people are losing a great deal of money.

-The passage talks about long term benefits for stock brokers in a fast declining stock market. 
-Here, most investors are selling and many people are losing a great deal of money.

After all, the volume of daily transactions rises dramatically in such a market, and the stockbrokers, who receive a commission on each sale, collect a windfall of commission income 
 -The number of transactions per day is steeply high in such a market. 
-Therefore, stockbrokers make a fortune by collecting a commission on each sale.

Prethinking

Weakener framework

What new information will make us believe less in the conclusion that there are long-term benefits for Wall Street stockbrokers in a rapidly falling stock market,

Given that 
-stockbrokers in a rapidly falling stock market in which most investors are selling and many people are losing a great deal of money 
-The volume of daily transactions rises dramatically in such a market, and the stockbrokers receive a commission on each sale.

Weakener 1

In the long term, after a rapid fall, the number of transactions will be extremely low.

Answer Choice Analysis

A. Some investors whose stocks are affected in a falling market have purchased their stocks on margin—i.e., on credit—and must complete payment at the full purchase price while their stocks are actually declining in value. 
 Whether on credit or not, the broker gets his/her payment when the market is falling. Hence this option cannot act as a weakener.   
 
 B. Many Wall Street stockbrokers sell not only stocks, but also bonds, money-market funds, and insurance-investments that might actually improve in value during a rapidly falling stock market. 
 This option strengthens the conclusion by giving a reason for how the brokers benefit from the fall. Hence it cannot be the right answer. 
 
C. Only ten percent of stock-buying and selling on Wall Street is conducted on behalf of individual investors; ninety percent is conducted on behalf of institutional investors. 
 This does not affect the fact that brokers make a fortune during the high number of sales happening during a steep falling market. Hence this is not the right answer.

D. After a rapidly falling market, relatively few stockbrokers give up stock-trading and leave Wall Street. 
 This option actually strengthens the conclusion since it implies that few if any stockbrokers stop working/lose jobs in the field due to a sudden fall. This supports the situation of the brokers. Therefore, it cannot be the correct answer.  
 
E. After a rapidly falling market, the volume of trading in the stock market generally declines and remains at a low level for an extended period of time. 
 This option is in line with our prethought weakener. This is the correct answer.

Kritisood · Answer

IMO E as the question stem mentions "there are actually  long-term  benefits for Wall Street stockbrokers in a rapidly falling stock market..." with E its clear that any benefits would be only short term and not LT if the mentioned situation arises.

Batman117 · Answer

E.
High volume transaction during fall of stocks BUT after that for long period ,there is less transaction SO less commission.
IN SHORT ON LONG TERM PERSPECTIVE IT IS LOSS TO BROKER.

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lakshya14 · Answer

Isn't (E) contradicting itself from the premise at the start of the second sentence?

jaisonsunny77 · Answer

A. Some investors whose stocks are affected in a falling market have purchased their stocks on margin-i.e., on credit-and must complete payment at the full purchase price while their stocks are actually declining in value.  -  this is an investor's dilemma, not one experienced by the stock brokers. 
  
B. Many Wall Street stockbrokers sell not only stocks, but also bonds, money-market funds, and insurance-investments that might actually improve in value during a rapidly falling stock market.  -  irrelevant to the conclusion drawn. 
  
C. Only ten percent of stock-buying and selling on Wall Street is conducted on behalf of individual investors; ninety percent is conducted on behalf of institutional investors.  -  irrelevant. 
  
D. After a rapidly falling market, relatively few stockbrokers give up stock-trading and leave Wall Street.  -  this highlights a relatively stable number of stock brokers, a number that is not relevant to the conclusion drawn.

E. After a rapidly falling market, the volume of trading in the stock market generally declines and remains at a low level for an extended period of time. - if the volume of trading declines, then the commission rates for stock brokers decline. Hence, stock brokers will not have any long term benefits. This weakens the conclusion drawn. Hence,  (E) is the right answer choice.

krishsaisree · Answer

This is a weaken question.

Conclusion: Falling stock markets have long term benefits for Stock Brokers (SB). 
Premise: Number of trans. increases even if the market is falling, and SB makes commissions on these.

A. Some investors whose stocks are affected in a falling market have purchased their stocks on margin-i.e., on credit-and must complete payment at the full purchase price while their stocks are actually declining in value.
 --> Has nothing to do with Premise/Conclusion. Discard

B. Many Wall Street stockbrokers sell not only stocks, but also bonds, money-market funds, and insurance-investments that might actually improve in value during a rapidly falling stock market.
 --> Again has nothing to do with long term effects or commission due to transactions. Just says what the nature of certain transactions might be

C. Only ten percent of stock-buying and selling on Wall Street is conducted on behalf of individual investors; ninety percent is conducted on behalf of institutional investors.
 --> Again, nothing to do with premise or conclusion. Just states type of investors. Irrelevant. Discard!

D. After a rapidly falling market, relatively few stockbrokers give up stock-trading and leave Wall Street.
 --> Kinda seems to say that SBs retire, which could imply that long term effects are poor. But still doesnt say why. Hold on, but mostly will have to discard if option E is better.

E. After a rapidly falling market, the volume of trading in the stock market generally declines and remains at a low level for an extended period of time.
  --> This is it. Attacks the conclusion just as right. Although #Transactions might increase when the market is falling. It plunges after that, which means the SBs dont make money for "extended period" after the initial surge. Clearly states why there might not be "long-term" benefits after all.

IGIG · Answer

E

Because the question talks about 'long term benefits' which is contradicted by option E.

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Yes2GMAT · Answer

Questions like these are extremely annoying. Personally, I think the answer choice would have changed if the level of the same question was slightly higher.

I went with C because the question prompt talks about "people" and I thought the argument meant that commissions come specifically from retail investors not institutional investors. Even though they mention about long-term benefits, I ruled out answer choice E) and D) because they asked us about what happens in a rapidly falling market and not after it. The commissions could still be high during the period with rapidly falling market (which is a given) and the stockbrokers could still benefit from the same.

Can anyone clarify this?

KarishmaB

KarishmaB · Answer

The most important part of a weaken question is this - identify the conclusion. If this is done correctly, half your problem is already over. Premise: The volume of daily transactions rises dramatically in rapidly falling market, and the stockbrokers, who receive a commission on each sale, collect a windfall of commission income. Conclusion: There are actually long-term benefits for Wall Street stockbrokers in a rapidly falling stock market in which most investors are selling and many people are losing a great deal of money. We have to find the option that weakens this conclusion. A. Some investors whose stocks are affected in a falling market have purchased their stocks on margin—i.e., on credit—and must complete payment at the full purchase price while their stocks are actually declining in value. Irrelevant. Do stockbrokers have long term benefits in a rapidly falling stock market is the point of contention. Investors plight is irrelevant in this argument. B. Many Wall Street stockbrokers sell not only stocks, but also bonds, money-market funds, and insurance-investments that might actually improve in value during a rapidly falling stock market. If stockbrokers sell bonds, money-market funds, and insurance-investments that improve in value at this time, then possibly people are buying those. In that case too, there is a sale taking place and the stockbroker gets paid for each sale - buy or sell. So it strengthens our conclusion. C. Only ten percent of stock-buying and selling on Wall Street is conducted on behalf of individual investors; ninety percent is conducted on behalf of institutional investors. Doesn't matter whose stocks are getting sold - individuals or intitutional. We are given that stockbrokers receive a commission on each sale so they will received on the sale of the stocks of institutional investors too. D. After a rapidly falling market, relatively few stockbrokers give up stock-trading and leave Wall Street. Irrelevant. We are concerned about those who stick around. We are looking for "long term benefits" for them. E. After a rapidly falling market, the volume of trading in the stock market generally declines and remains at a low level for an extended period of time. This weakens our argument. This indicates that the stockbrokers do not get "long term benefits". Rapidly falling stock market may give them an immediate windfall but not long term benefits. In the long term, trading declines and remains low for a long time. Answer (E) Check weaken questions here: https://youtu.be/EhZ8FKkfy0k

VerbalBot · Answer

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There are actually long-term benefits for Wall Street stockbrokers in

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