Perry: Worker–owned businesses require workers to spend time on management decision–making and investment strategy, ...

Mnv on June 7, 2020

Answer choice A for Q12

Hi I’m confused about why A is wrong? It seems decrease the credibility of non-worker owned businesses.

Create a free account to read and take part in forum discussions.

Already have an account? log in

Victoria on June 15, 2020

Hi @Mnv,

Perry concludes that lenders aiming to reduce their own risks should not loan money to worker-owned businesses.

Why? Because worker-owned businesses can be inefficient for two reasons:

(1) They require workers to make management decisions i.e. tasks that are not directly productive.
(2) They have a less extensive division of labour than investor-owned businesses.

Perry tells us that these inefficiencies can lead to low profitability and increased risk.

Answer choice (A) is incorrect because it is irrelevant to Perry's argument. Even if non-worker-owned businesses sometimes fail to fully harness their workers' potential, this does not mean that worker-owned businesses are not still risky ventures for investors.

Answer choice (E) directly addresses the inefficiencies which Perry tells us increase the risk for investors. If workers in worker-owned businesses compensate for these inefficiencies, then there is no reason why investors should not lend them money.

Hope this is helpful! Please let us know if you have any further questions.