Let us trace the author's logic in the passage. The author is explaining that institutions can be formal or informal -> then gives examples -> stock exchange (formal) and black market (informal) are both market institutions -> this shows different types can exist in the same area. From passage: "There are some institutions that come in both informal and formal variants, as well as in mixed ones. Consider the fact that the stock exchange and the black market are both market institutions, one formal one not." Author's thought process -> institutions have different forms -> some formal, some informal -> need examples -> both stock exchange and black market deal with markets -> but one follows official rules (formal) while other doesn't (informal) -> this proves different types can exist together in same domain.

Let's check each option against what the quote is actually demonstrating: 🟢 Option 1 -> correct -> captures the main point that different institutional types (formal vs informal) can exist within the same domain (market institutions) 🔴 Option 2 -> irrelevant -> talks about dependency on markets, but the quote isn't about survival or dependency - it's about showing formal vs informal distinction 🔴 Option 3 -> misses the point -> says both are organized by rules, but that's wrong - black market specifically doesn't follow formal rules, that's why it's informal 🔴 Option 4 -> scope-error -> focuses only on trading mechanisms rather than the broader institutional point about formal vs informal coexistence The confusion students might have: Options 3 and 4 sound reasonable because they mention both institutions. But remember - the author's goal is to show the formal/informal distinction, not explain how they operate.

CAT (VARC) PYQs

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