PT23.S3.Q1

SECTION 1 · lr

Question 1 Question 2 Question 3 Question 4 Question 5 Question 6 Question 7 Question 8 Question 9 Question 10 Question 11 Question 12 Question 13 Question 14 Question 15 Question 16 Question 17 Question 18 Question 19 Question 20 Question 21 Question 22 Question 23 Question 24 Question 25

SECTION 2 · lr

Question 1 Question 2 Question 3 Question 4 Question 5 Question 6 Question 7 Question 8 Question 9 Question 10 Question 11 Question 12 Question 13 Question 14 Question 15 Question 16 Question 17 Question 18 Question 19 Question 20 Question 21 Question 22 Question 23 Question 24 Question 25 Question 26

SECTION 3 · lr

Question 1 Question 2 Question 3 Question 4 Question 5 Question 6 Question 7 Question 8 Question 9 Question 10 Question 11 Question 12 Question 13 Question 14 Question 15 Question 16 Question 17 Question 18 Question 19 Question 20 Question 21 Question 22 Question 23 Question 24

SECTION 4 · rc

PASSAGE 1
Question 1 Question 2 Question 3 Question 4 Question 5

PASSAGE 2
Question 6 Question 7 Question 8 Question 9 Question 10 Question 11 Question 12 Question 13

PASSAGE 3
Question 14 Question 15 Question 16 Question 17 Question 18

PASSAGE 4
Question 19 Question 20 Question 21 Question 22 Question 23 Question 24 Question 25 Question 26

PrepTest 23 - Section 3 - Question 1

Question

Explanation

Analytics

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Owners of deeply indebted and chronically unprofitable small businesses sometimes try to convince others to invest money in their companies. █████ ███ █████ ████ ████████ ████ ██████████ ██ ████ ██ ███ ███ ██████ ██████ ████ ██ ██████ ███████████ ████ █████ ████ ███ █████████ █████ ██████ ██ ████ ██████████ █████ ████ ██████ ███ █████████ ██ ████ █████ ████████████ █████████████ ████████ ████ ███████████ █████ ████ ████████ ███████ ██ ███ ████ █████ ████ ████ ███ █████

Objective: Explain a Surprising Result

The stimulus tells us about investments in "deeply indebted and chronically unprofitable" small businesses. When people invest in these kinds of businesses, the money is used to pay off debts, so doesn't help with sales growth. But even so, it's common for people investments in such businesses to make good returns even within the first year. This is the surprise: it's unexpected that investments in indebted and unprofitable small businesses, which only go toward paying off debts, would be successful.

To explain this surprising result, we're looking for an answer that makes it less surprising. We want to add some detail as to how exactly these businesses are able to offer a good return on investment. We already know that the money is used to pay off debts, so we want the correct answer to explain how paying off debts can result in a return on investment.

Analysis by AlexandraNash

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Which one of the following, ██ █████ ████ █████ ██ ███████ ███ ██████████ ███████ ██ ████ ████████████

Investors usually choose ██ ████████ █████ ███████ ██ ████ ████████████

Whatever investors do with their returns, that only matters after the return has been realized. We're concerned with what allows investors to get these returns in the first place.

Expanding production in ████ █████████ █████ ███████ ███████ ████ █████ ████ █████ ██████ ███ ██████

Maybe this explains why small business owners use investments to pay off debts, but we already knew that the invested money is used to pay off debts. This still doesn't explain how that generates a good return.

Paying off debts, ██ ██████ █ ███████ ███ █████ ██ █████ █████████ ███ ██ █████████ █████████ ███ █████████ ███████ ████████ ███ ███████ █████████ ███ ████████

Paying off debts with invested money increases profits, which is a concrete explanation for how these investments can be successful. By explaining the mechanism that allows the investments to generate a return, (C) makes that result less surprising.

Banks are reluctant ██ ████ █████ ██ ███ ███████ ████ ██ ███████ ███████ ██ ████ ███ ███████████ █████████████

The stimulus already tells us that most people are reluctant to invest in these businesses; saying that banks feel the same way doesn't add any useful new information. We want to know how it's possible that the people who do invest can make a good return.

If the sales ██ █ ███████ ██ ███ █████ █████ ██ ███████ ██████ ████ ██ ██████ █ █████ █████ ██ ███████ █████████ ██ █████████ ███████████

From the stimulus, we know that invested money is used to pay off debts, so whether it would be useful to expand production doesn't make a difference. We need an answer that explains how paying off debts generates a return.

Difficulty

Question

97% of people who answer get this correct

This is a low-difficulty question.

CURVE

Score of students with a 50% chance of getting this right

25% 120

129

75% 141

Analysis

Question Stem Tags

Resolve reconcile or explain

Answer Popularity

Popularity Avg. score

162

156

97%

168

157

161

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