Public-sector (government-owned) companies are often unprofitable and a drain on the taxpayer. Such enterprises should be sold to the private...
GMAT Critical Reasoning : (CR) Questions
Public-sector (government-owned) companies are often unprofitable and a drain on the taxpayer. Such enterprises should be sold to the private sector, where competition will force them either to be efficient and profitable or else to close.
Which of the following, if true, identifies a flaw in the policy proposed above?
Passage Analysis:
| Text from Passage | Analysis |
| Public-sector (government-owned) companies are often unprofitable and a drain on the taxpayer. |
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| Such enterprises should be sold to the private sector, where competition will force them either to be efficient and profitable or else to close. |
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Argument Flow:
The argument starts by identifying a problem (government companies lose money and burden taxpayers), then proposes a solution (sell them to private sector where competition will fix the inefficiency).
Main Conclusion:
Government-owned companies should be sold to the private sector.
Logical Structure:
Problem-Solution structure: Since public companies are unprofitable and drain taxpayers (problem), we should sell them to private sector where competition will make them efficient or close them (solution).
Prethinking:
Question type:
Misc - This is asking us to identify a flaw in the proposed policy of selling government companies to private sector
Precision of Claims
The argument makes absolute claims about what competition will do - it assumes private sector competition will always force efficiency or closure, without considering exceptions or limitations
Strategy
Since this asks for a flaw in the policy, we need to think about scenarios where the proposed solution might not work as intended. We should look for situations where selling to private sector might not solve the taxpayer burden problem or might create new problems. The flaw could be in the assumption that private competition always leads to efficiency or closure, or that privatization always benefits taxpayers
The revenue gained from the sale of public-sector companies is likely to be negligible compared to the cost of maintaining them.
This talks about the revenue from selling being small compared to maintenance costs. However, this doesn't identify a flaw in the policy itself - it just suggests the financial benefit might be limited. The policy could still work to reduce ongoing taxpayer burden even if the sale price is low. This doesn't show why the privatization strategy would fail.
By buying a public-sector company and then closing the company and selling its assets, a buyer can often make a profit.
This actually supports privatization by showing that buyers can profit from these transactions. If buyers can make money by buying and then selling assets, this suggests there is value in these companies that private sector can unlock. This doesn't identify a flaw - it shows the policy might work.
The services provided by many public-sector companies must be made available to citizens, even when a price that covers costs cannot be charged.
This identifies a fundamental flaw in the policy. The argument assumes that if private companies can't make government services profitable, they can simply close. But many government services (like public transit, utilities, emergency services) MUST continue operating even when unprofitable because citizens depend on them. If privatization fails and these essential services close, the government would have to step back in, potentially costing taxpayers even more. This directly contradicts the author's assumption that closure is an acceptable outcome.
Some unprofitable private-sector companies have become profitable after being taken over by the government to prevent their closing.
This discusses the reverse situation (private companies being taken over by government) which doesn't address flaws in the proposed policy of selling government companies to private sector. This is about a different direction of ownership transfer and doesn't identify problems with privatization.
The costs of environmental protection, contributions to social programs, and job-safety measures are the same in the public and private sectors.
This states that certain costs are the same in both sectors. While this might suggest privatization won't reduce some expenses, it doesn't identify a fundamental flaw in the policy. Private companies could still achieve efficiency in other areas not mentioned here.