PT157.S4.P2.Q9 > Analytics

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Passage A.

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Intro to Topic · Markets Good

Markets efficiently distill the collective wisdom; they require buy in; they reward being right.

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Markets for Forecasting · Performs better than 75% of polls

The Iowa Electronic Markets can forecast election results. Buyers and sellers can trade on their bets of which candidate is more likely to win.

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Markets are Efficient · Information spreads very quickly

Experiment that demonstrated how quickly "inside knowledge" can spread in the market via price as a signaling mechanism.

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Intro to Topic · Markets are not perfect

Sounds like a disagreement with Passage A's position...

Example · Iowa Electronic Markets

The Iowa Electronic Markets didn't get a recent election result right until a few days before the election.

Analogy · Markets are like racetracks

You make bets based on what you expect the payoff to be

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What do "prediction markets" actually do? · Reflect majority opinion

They are not omniscient. They are a better version of polls that generates more serious responses.

Passage Style

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Question Type

Implied

Purpose of passage

Split Approach: After passage A, eliminate any answer choice that doesn’t start with the purpose of passage A. Then, after passage B, choose the remaining answer choice that ends with the purpose of passage B.

Sequential Approach: Author A’s argument is that markets are effective and efficient. His purpose is to argue in support of something. Author B’s argument, meanwhile, is to critique something that author A favors (namely, prediction markets). So we should look for answer along the lines of “support and critique.”

persuade and inform

The purpose of passage A is to persuade us that markets are effective and efficient.

But the purpose of passage B isn’t just to inform us; it’s also to persuade us (that prediction markets aren’t that reliable). “Inform” is too neutral a description of the purpose of passage B. Also, we we could just as readily say that author A’s purpose is likewise to inform us (about how markets overall are effective and efficient). Since it applies equally well to both passages, “inform” isn’t a very precise description of passage B’s purpose.

challenge and defend

Passage A doesn’t challenge anything; it supports the position that markets are effective and efficient.

And passage B doesn’t defend anything; it critiques the position that prediction markets are reliable.

present and interpret

We can say that passage A’s purpose is to “present” insofar as it presents an argument in support of markets. But the same could just as readily be said of passage B; its purpose is to present an argument that critiques prediction markets. Since it applies equally well to both passages, “present” isn’t a very precise description of passage A’s purpose.

And author B doesn’t “interpret” the argument presented by author A. She provides a her own argument to critique something that author A supports (namely, prediction markets). (E) captures this better.

12%

entertain and educate

Author A lays out an argument in favor of something. Nothing suggests that his purpose is to entertain; he’s simply trying to support the position that markets are effective and efficient.

We could say that author B’s purpose is to educate us about how prediction markets can be unreliable. But we could just as readily say that author A’s purpose is likewise to educate us (about how markets overall are effective and efficient). Since it applies equally well to both passages, “educate” isn’t a very precise description of passage B’s purpose.

advocate and deflate

Author A’s argument is that markets are effective and efficient. His purpose is to argue in support of something. “Advocate” is a good description of this.

Author B’s argument, meanwhile, is to critique something that author A favors (namely, prediction markets). To “deflate” someone’s position is a reasonable metaphor for critiquing that position.

74%

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PrepTest 157 - Section 4 - Passage 2 - Question 9

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PrepTest 157 - Section 4 - Passage 2 - Question 9

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