It is called a sea, but the landlocked Caspian is actually the largest lake on Earth, which covers more than four times the surface area of its closest rival in size, North America's Lake Superior.
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The sentence seems to say that:
Even though landlocked Caspian is called a sea, it is actually the largest lake on Earth (i.e. it is called a sea but it is a lake). This lake covers xyz surface area. “xyz” is actually a comparison with the surface area of some other lake. But we need not be concerned about that. We just need to understand the gist of the non-underlined part.
The sentence has the following problems:
- The sentence starts with an independent clause containing a pronoun (it), and then the next independent clause contains the noun (Caspian), which is the antecedent of the pronoun. While a pronoun may appear before its antecedent in a sentence, such sequence is generally permissible only when both are part of the same independent clause. Here, we are dealing with two separate independent clauses.
- The antecedent of “which” can be “the largest lake on Earth”. However, in such case, the sentence structure is this: “Caspian is the largest lake on Earth, which covers xyz area”. Logically, if Caspian is the largest lake, then Caspian itself covers xyz area. Thus, it is more logical to present “cover xyz area” as a separate predicate for the subject Caspian than to present it as a modifier, as in the given sentence.
(A) Incorrect. For the reasons mentioned above.
(B) Incorrect. This option has Problem no. 2 of the original sentence.
(C) Correct. The sentence presents the initial contrast using “Though + verb-ed modifier”. Such construction is perfectly fine as explained in this article. Also, “comma + covering” modifies the preceding clause, presenting additional information about the preceding clause. Caspian is the largest lake on Earth. How? It covers more surface area than its closest rival in size.
(D) Incorrect. For the following reasons:
- The use of “though” and “but” together leads to illogical double contrast.
- Given that “though called a sea” is followed by another clause beginning with “but”, it is not clear what “called” modifies. Logically, it should modify “Caspian”. However, there is a clause “but it actually is…” in-between.
(E) Incorrect. The contrast in this option is: Even though the largest lake on Earth is called a sea, the largest lake is actually landlocked Caspian. Clearly, the original logical contrast (xyz is called a sea but it is a lake) has been replaced by an illogical contrast (largest lake is called a sea but it is Caspian) in this option. Secondly, the section in the non-underlined part “its closest rival” now means the closest rival of the largest lake. We don’t say that second ranking person is the rival of the “first rank”. The correct phrasing is: the second ranking person is the rival of the first ranking person.