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Yes, this type of string processing problem appears in technical interviews at large tech companies. It tests understanding of string matching, interval merging, and efficient data structure usage such as hash sets or tries.
A boolean array or interval list is commonly used to mark matching positions in the string. For faster prefix matching with many dictionary words, a Trie data structure can be used to efficiently check substrings starting at each index.
The common optimal approach is to mark all indices that belong to any matching dictionary word and then merge overlapping or adjacent ranges. After merging, insert <b> and </b> tags around those segments when building the final string. This ensures minimal tags and efficient processing.
Overlapping matches are handled by merging intervals that intersect or touch each other. Instead of inserting tags for each match separately, all connected ranges are combined into one bold segment before constructing the result string.