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Company X sold more products last year than it ever had before. However, Company X's profit last year was smaller than ever before.

Which of the following, if true, would most contribute to an explanation of the facts above?

Excellent!

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Take a look at the formula for this type of question: Profit = revenues - expenses.

The argument tells us that Company X's revenues have risen (sold more products than ever before) but that its profit has decreased. If revenues have risen and profits have decreased, then the only way to explain this is that expenses have risen as well. This answer choice says just that.

Incorrect.

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This answer emphasizes the paradox instead of resolving it. Not only did the company sell more products, it also sold them at high prices. This means high revenues, which would lead us to expect a bigger profit, not a smaller one.

Incorrect.

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This answer choice does not explain why, despite the rise in revenues, Company X made less money (smaller profit). It may be argued that Company Y drove Company X to lower its prices through competition, but this is not stated in the answer choice and therefore requires too many assumptions.

There's a better answer choice which resolves this paradox more directly. Look for it!

Incorrect.

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This answer choice emphasizes the paradox by validating premise B. In other words, "Tell us something we don't know!". It is obvious that if last year's profits were smaller than ever before, then previous years' profits were larger. So actually, the information contained in this answer choice is useless.

Incorrect.

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This answer choice emphasizes the paradox by further validating premise A. In other words, "Tell us something we don't know!". It is obvious that if more products were sold last year than ever before, then in previous years fewer products were sold. So actually, the data presented by this answer choice is useless.

The prices of the products sold by Company X last year were higher than ever before.
A new company, Company Y, entered the market and became a competitor of Company X.
Last year, the expenses of Company X were much higher than ever before.
Two years ago, Company X's profit was double its profit from last year.
Two years ago, Company X sold fewer products than it did last year.