#1 - Megatrash Co., the country's largest waste-disposal

[Administrator]

Complete Question Explanation

Resolve the Paradox. The correct answer choice is (D)

This stimulus presents an interesting paradox: Even as Megatrash keeps getting forced to pay for expensive fines and legal fees, the company grows more profitable. The correct answer choice will be consistent with both premises, and provide insight into how a company saddled with legal costs is growing more profitable. Correct answer choice (D) explains an incidental benefit of all of Megatrash’s legal troubles: competitors have left the field and deterred new competition, leaving Megatrash much of the market. None of the other answer choices explain Megatrash’s recent growth.

[Bruin96]

Can someone please explain why E is wrong? I was between D and E. Also, is A incorrect because it refers to "firms" rather than the company?

[Jeremy Press]

Hi Bruin96,

The problem with answer choice E is that, while it sheds light on what the stimulus says about legal attacks costing the company "substantial amounts of money," it does not help explain the other side of the paradox: why is the company growing "stronger and more profitable?" We just can't tell why the company is getting stronger based on what answer choice E says. In fact, answer choice E makes it seem like the company should be getting weaker (given that it's paying out legal fees that are even greater than what its fines would be).

The problem with answer choice A is the same problem: I'm not too concerned with the language of "firms" being used (that would cover Megatrash, and any other company). I just can't understand, if answer choice A is true, why Megatrash would be getting stronger and more profitable.

Keep in mind that in a Resolve the Paradox question, the task is always to identify an answer that explains how two seemingly contradictory facts could be simultaneously true. Here, the two facts that are seemingly contradictory are: (1) Megatrash is suffering fines and legal fees that have cost it a substantial amount of money, and (2) Megatrash is getting stronger and more profitable. Any answer choice has to explain how both of those things could be true simultaneously.

I hope this helps!

Jeremy