#20 - Must Be True

[Administrator]

Complete Question Explanation
(See the complete passage discussion here: lsat/viewtopic.php?t=14161)

The correct answer choice is (B)

This question tests your understanding of a key concept in this passage—that of increasing returns
to scale. Approach it like you would any Must Be True/Principle question: use the principle of
increasing returns to scale, as you understand it from the second paragraph of the passage, and apply
it to the situation in each answer choice. Essentially, your job is to find an enterprise similar to Adam
Smith’s pin factory: larger size allows for greater specialization of labor, which increases efficiency
and ultimately leads to greater returns.

Answer choice (A): This answer choice is incorrect, because large-scale enterprises do not
necessarily have relaxed employee standards.

Answer choice (B): This is the correct answer choice, as it properly describes a positive “feedback
loop” between labor specialization and growth: the larger the bee colony, the better the bees can
divide up the work of processing the nectar. This, in turn, enables the colony to collect even more
nectar (and increase in size). Similarly, a larger pin factory enables each worker to specialize on a
narrower set of tasks, which in turn guarantees greater returns and huge increases in efficiency.

Answer choice (C): Here, a school district is able to increase the size of its student body by
extending its operations year-round. The pin factory, by contrast, achieves growth through more
efficient and specialized labor, not by prolonging the work-day of its employees.

Answer choice (D): This answer choice describes an industry whose growth results primarily from
advances in technology. The concept of increasing returns to scale is indifferent to such advances:
in the pin factory, growth enables—and is enabled by—greater specialization of labor, not more
advanced machinery.

Answer choice (E): Hopefully you were able to eliminate this answer choice relatively quickly, as it
describes the concept of diminishing returns: the divided colonies together contain more ants than
could have existed in one colony.

[lemonade42]

Hi, can you explain more on how (E) is showing diminishing returns? I thought diminishing returns on scale would mean the bigger something become (increasing scale), the less efficiency or products being made (diminishing returns). I can't see how this relates to the ant colony being split into 2.

[Jeff Wren]

Hi lemonade,

Your understanding of diminishing returns is basically correct: The bigger something becomes the more difficult it becomes to increase output (or productivity).

The reason that Answer E illustrates this concept is that the large ant colony has presumably reached this point of diminishing returns. The ant colony is too large, which is why it splits into smaller competing colonies that then can grow themselves. (To be clear, this isn't explicitly stated, but this is what is being illustrated.) The key is the last sentence of the answer, which states that the separate colonies contain more ants than could have existed in one colony. In other words, a bunch of smaller colonies is better/more successful than one large colony.

For the purposes of this question, you can think of the ant colony as equivalent to the pin factory discussed in the passage. What we're looking for in the correct answer is a large ant colony that is more efficient due to specialized labor, which is described in Answer B.

Answer E would be the equivalent of the large pin factory "monopoly" being broken up into competing smaller companies, which is not an illustration of increasing returns to scale.