Here's why:
* Pronouns stand in for nouns.
* "It" is replacing the noun phrase "the story" in the second sentence.
So the sentence would look like this with the pronoun circled:
The students are reading a story. It is about a dragon?
Here's why:
* Pronouns stand in for nouns.
* "It" is replacing the noun phrase "the story" in the second sentence.
So the sentence would look like this with the pronoun circled:
The students are reading a story. It is about a dragon?