It was through a survey that we found out that most scholarship-gaining…

In a resolve-the-paradox critical reasoning question, two facts about the same subject look inconsistent on the surface. The correct choice supplies a plausible reason that lets both facts hold true of the same situation the passage describes; merely asserting that the two facts involve different people, without any reason for it, does not count as an explanation — it only denies the premise instead of reconciling it.

Here the two facts are: scholarship applicants generally understate their overall financial capacity to maximize the aid they receive, yet the same applicants also claimed possessions — cars and two-storey houses — they did not own. The explanation that resolves this without contradiction is that applicants distinguish between admitting a modest overall financial position, which they are comfortable doing because it helps their scholarship case, and admitting they lack specific status possessions, which embarrasses them into inventing false claims. Being willing to accept lacking ‘certain things’ but embarrassed to accept lacking ‘most things’ lets the same group behave both ways for two different, non-competing reasons.

Checking the other options against both facts of the paradox:

• “The college does not give scholarship unless the applicants have at least some things working for them” only supplies a reason to claim possessions; it says nothing about why the same applicants would also understate their overall financial capacity, so it leaves half the paradox unexplained.

• “Claiming that they do not have a stable financial condition ensures that the college looks at the applicant more favorably” explains only the understating behavior; it is silent on why anyone would also falsely claim cars and houses.

• “The people who understated what they had were not the same people who overstated what they had” only denies that the paradox involves one group — it never gives a reason for why two different populations would behave differently, so it does not actually explain anything. The passage introduces both findings together as one survey's report (“the particular survey also pointed out”) and explicitly calls the combination paradoxical — a framing that only makes sense if the same respondents are meant, since two disconnected facts about unrelated people would not be puzzling at all. A real resolution must show how the applicants the passage is describing could sensibly do both things, which only the embarrassment-based explanation supplies.

Only the embarrassment-based explanation supplies an actual reason consistent with the passage's own framing of one puzzling picture, which is what resolving this apparent paradox requires.