PrepTest 26, Section 3, Question 25
Credit card companies justify charging cardholders additional fees for late payments by asserting the principle that those who expose other individuals, companies, or institutions to financial risk should pay for that risk, and by pointing out that late-paying cardholders present a greater risk of default than other cardholders. Without late fees, the companies argue, they would have to spread the cost of the risk over all cardholders.
Credit card companies justify charging cardholders additional fees for late payments by asserting the principle that those who expose other individuals, companies, or institutions to financial risk should pay for that risk, and by pointing out that late-paying cardholders present a greater risk of default than other cardholders. Without late fees, the companies argue, they would have to spread the cost of the risk over all cardholders.
Credit card companies justify charging cardholders additional fees for late payments by asserting the principle that those who expose other individuals, companies, or institutions to financial risk should pay for that risk, and by pointing out that late-paying cardholders present a greater risk of default than other cardholders. Without late fees, the companies argue, they would have to spread the cost of the risk over all cardholders.
Credit card companies justify charging cardholders additional fees for late payments by asserting the principle that those who expose other individuals, companies, or institutions to financial risk should pay for that risk, and by pointing out that late-paying cardholders present a greater risk of default than other cardholders. Without late fees, the companies argue, they would have to spread the cost of the risk over all cardholders.
The principle invoked by the credit card companies would, if established, be most usefully invoked in which one of the following arguments?
School authorities should use student activity funds to pay for student-caused damages to school property since, even though only a few students cause any significant damage, authorities cannot in most instances determine which students caused the damage.
Insurance companies should demand higher insurance rates of drivers of sports cars than of other drivers, since sports car drivers are more likely to cause accidents and thus are more likely to require the companies to pay out money in claims.
Libraries should charge high fines for overdue books, since if they did not do so some people would keep books out indefinitely, risking inconvenience to other library users who might want to use the books.
Cities should impose high fines for littering. The risk of being caught littering is quite low, so the fine for those who are caught must be correspondingly high in order to deter people from littering.
Municipalities should use tax money to pay for the maintenance of municipal roads, since if individuals paid for only those roads they used, some important roads in remote areas would be inadequately maintained.
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