Q23: A developing country can substantially increase

LR Question 23 Explanation, by LSATHacks

QUESTION TEXT: A developing country can substantially increase its…

QUESTION TYPE: Most Strongly Supported

FACTS:

Investment in modern technologies by businesspeople can increase growth in developing countries.
It’s risky to be the first to invest.
If you succeed in your investment, people will copy you and eat up your profits.

ANALYSIS: There’s an important distinction this question hints at but doesn’t say directly: economies can grow even if entrepreneurs don’t profit.

Suppose an entrepreneur invents a phone that can be controlled from your mind (cool!). Say it costs $500 to produce. Now imagine a 2nd entrepreneur copies the idea and sells the phone for exactly $500.

There’s $0 profit for both entrepreneurs. But the economy has grown. We now have better phones! Most of the wrong answers ignore this difference between economic growth and individual profit.

___________

This is silly. We know that the initial investment helps the economy. There’s no evidence that further investment won’t help the economy.
We know that investment may not be profitable for entrepreneurs. But something can grow the economy even if entrepreneurs make no money.
There’s no support for this. The argument doesn’t say how much competition exists in traditional industries.
CORRECT. This is fairly well supported. There is currently little incentive for entrepreneurs to invest. But investment will probably increase economic growth. So if countries can encourage investment with incentives, they may see growth.
This isn’t supported. The first sentence says that investment in modern industries is one way the economy can grow. But that doesn’t mean its the only way to get growth.
This doesn’t make sense. We know the first investment is risky. And we know the later investments eat up profit. And nothing says later investments are less risky. So it’s quite possible that later investments are both risky and unprofitable.