Logical reasoning PrepTest 145 · Section 4 · Question 3

Incorrect. This answer creates a similarity between high- and low-income countries, so it wouldn't explain how one of them ended up with a higher level of business formation. Also, the expectations of those starting the business don't determine how well those explanations will be met.

Incorrect. This is a relevant difference that suggests high-income countries should have a higher level of business formation, so this answer makes the paradox worse.

Incorrect. First, this answer brings up a similarity between high- and low-income countries, which wouldn't explain a difference. Second, there's nothing tying business failure rates to business creation rates, so this answer is also out of scope.

Incorrect. What happens after the businesses are formed is out of scope unless specifically tied into the creation rate. Also, this answer doesn't discuss the low-income countries, or raise something that would be inherently different in those countries.

Correct. Argument or Facts:
Facts

Question Type:
Paradox

Stimulus Summary:
Businesses generally start to take advantage of business opportunities, so it makes sense more businesses start in high-income countries than moderate-income ones. However, the highest business formation rate is in low-income countries.

Answer Anticipation:
The stimulus starts out by giving us the reason that people start businesses—to take advantage of perceived business opportunities. It then goes on to explain why this makes sense in the context of there being more businesses forming in high-income countries than moderate-income ones. In order to explain why there are even more businesses formed in low-income countries, we should look for an answer that does the same—states that there are more perceived business opportunities in low-income countries than high-income ones, or a similar reason for starting a new business that applies more in these countries than high-income ones.

Note the comparative language in that anticipation—the stimulus compares countries at different incomes to each other to highlight differences, so we should make sure our answer points out something different about low-income countries compared to high-income ones that would point to higher levels of business formation.

Answer Explanation:
This answer provides a reason to start a business that wouldn't be present in a high-income country—by definition, those places have more or better job opportunities than low-income countries. By providing a reason for job creation that applies in low-income countries but not high-income countries, this answer explains the paradox.

Key Takeaway:
Paradox questions that draw comparisons generally need answers that bring up a separate and relevant point of comparison that can resolve the difference driving the paradox. However, be careful—while most answers will mention both elements in the comparison, some tougher ones will only bring up a single element. For it to be correct, it needs to bring up something that can either inherently be related to the other thing in the comparison, or bring up something that was already established for the other element in the stimulus.