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# Federal efforts to aid minority businesses began in the 1960's when th

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Updated on: 10 Aug 2019, 06:00
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The Official Guide for GMAT Review 10th Edition, 2003

Practice Question
Question No.: SC 13 ~ 18
Page: 324

Federal efforts to aid minority businesses began in the 1960's when the small business administration (SBA) began making federally guaranteed loans and government-sponsored management and technical assistance available to minority business enterprises. While this program enabled many minority entrepreneurs to form new businesses, the results were disappointing, since managerial inexperience, unfavorable locations, and capital shortages led to high failure rates. Even 15 years after the program was implemented, minority business receipts were not quite two percent of the national economy's total receipts.

Recently federal policymakers have adopted an approach intended to accelerate development of the minority business sector by moving away from directly aiding small minority enterprises and toward supporting larger, growth-oriented minority firms through intermediary companies. In this approach, large corporations participate in the development of successful and stable minority businesses by making use of government-sponsored venture capital. The capital is used by a participating company to establish a minority enterprise small business investment company or MESBIC. The MESBIC then provides capital and guidance to minority businesses that have potential to become future suppliers or customers of the sponsoring company.

MESBIC's are the result of the belief that providing established firms with easier access to relevant management techniques and more job-specific experience, as well as substantial amounts of capital, gives those firms a greater opportunity to develop sound business foundations than does simply making general management experience and small amounts of capital available. Further, since potential markets for the minority businesses already exist through the sponsoring companies, the minority businesses face considerably less risk in terms of location and market fluctuation. Following early financial and operating problems, sponsoring corporations began to capitalize MESBIC's far above the legal minimum of \$500,000 in order to generate sufficient income and to sustain the quality of management needed. MESBIC's are now emerging as increasingly important financing sources for minority enterprises.

Ironically, MESBIC staffs, which usually consist of Hispanic and Black professionals, tend to approach investments in minority firms more pragmatically than do many MESBIC directors, who are usually senior managers from sponsoring corporations. The latter often still think mainly in terms of the "social responsibility approach" and thus seem to prefer deals that are riskier and less attractive than normal investment criteria would warrant. such differences in viewpoint have produced uneasiness among many minority staff members, who feel that minority entrepreneurs and businesses should be judged by established business considerations. these staff members believe their point of view is closer to the original philosophy of MESBIC's and they are concerned that, unless a more prudent course is followed, MESBIC directors may revert to policies likely to recreate the disappointing results of the original SBA
approach.
1. Which of the following best states the central idea of the passage?

(A) The use of MESBIC's for aiding minority entrepreneurs seems to have greater potential for success than does the original SBA approach.

(B) There is a crucial difference in point of view between the staff and directors of some MESBIC's.

(C) After initial problems with management and marketing, minority businesses have begun to expand at a steady rate.

(D) Minority entrepreneurs wishing to form new businesses now have several equally successful federal programs on which to rely.

(E) For the first time since 1960, large corporations are making significant contributions to the development of minority businesses.

2. According to the passage, the MESBIC approach differs from the SBA approach in that MESBIC's

(A) seek federal contracts to provide markets for minority businesses

(C) attempt to maintain a specified rate of growth in the minority business sector

(D) rely on the participation of large corporations to finance minority businesses

(E) select minority businesses on the basis of their location

3. Which of the following does the author cite to support the conclusion that the results of the SBA program were disappointing?

(A) The small number of new minority enterprises formed as a result of the program

(B) The small number of minority enterprises that took advantage of the management and technical assistance offered under the program

(C) The small percentage of the nation's business receipts earned by minority enterprises following the programs, implementation

(D) The small percentage of recipient minority enterprises that were able to repay federally guaranteed loans made under the program

(E) The small number of minority enterprises that chose to participate in the program

4. Which of the following statements about the SBA program can be inferred from the passage?

(A) The maximum term for loans made to recipient businesses was 15 years.

(B) Business loans were considered to be more useful to recipient businesses than was management and technical assistance.

(C) The anticipated failure rate for recipient businesses was significantly lower than the rate that actually resulted.

(D) Recipient businesses were encouraged to relocate to areas more favorable for business development.

(E) The capitalization needs of recipient businesses were assessed and then provided for adequately.

5. The author refers to the "financial and operating problems" (line 38) encountered by MESBIC's primarily in order to

(A) broaden the scope of the discussion to include the legal considerations of funding MESBIC's through sponsoring companies

(B) call attention to the fact that MESBIC's must receive adequate funding in order to function effectively

(C) show that sponsoring companies were willing to invest only \$500,000 of government-sponsored venture capital in the original MESBIC's

(D) compare SBA and MESBIC limits on minimum funding

(E) refute suggestions that MESBIC's have been only marginally successful

6. The author's primary objective in the passage is to

(A) disprove the view that federal efforts to aid minority businesses have been ineffective

(B) explain how federal efforts to aid minority businesses have changed since the 1960's

(C) establish a direct link between the federal efforts to aid minority businesses made before the 1960's and those made in the 1980's

(D) analyze the basis for the belief that job-specific experience is more useful to minority businesses than is general management experience

(E) argue that the "social responsibility approach" to aiding minority businesses is superior to any other approach

7. Based on information in the passage, which of the following would be indicative of the pragmatism of MESBIC staff members?

I. A reluctance to invest in minority businesses that show marginal expectations of return on the investments
II. A desire to invest in minority businesses that produce goods and services likely to be of use to the sponsoring company
III. A belief that the minority business sector is best served by investing primarily in newly established businesses

(A) I only
(B) III only
(C) I and II only
(D) II and III only
(E) I, II and III

8. It can be inferred from the passage that the attitude of some MESBIC staff members toward the investments preferred by some MESBIC directors can best be described as

(A) defensive

(B) resigned

(C) indifferent

(D) shocked

(E) disapproving

9. The passage provides information that would answer which of the following questions?

(A) What was the average annual amount, in dollars, of minority business receipts before the SBA strategy was implemented?

(B) What locations are considered to be unfavorable for minority businesses?

(C) What is the current success rate for minority businesses that are capitalized by MESBIC’s?

(D) How has the use of federal funding for minority businesses changed since the 1960’s?

(E) How do minority businesses apply to participate in a MESBIC program?

Originally posted by surat on 18 Feb 2004, 03:40.
Last edited by SajjadAhmad on 10 Aug 2019, 06:00, edited 6 times in total.
Updated complete topic (108).
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Re: Federal efforts to aid minority businesses began in the 1960's when th  [#permalink]

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30 Jul 2017, 12:13
5
1
1
hazelnut wrote:
GMATNinja, Could you help with Q4? How do we able to infer and extract "the anticipated failure rate" from the passage?

The key lies in this sentence: "While this program enabled many minority entrepreneurs to form new businesses, the results were disappointing, since managerial inexperience, unfavorable locations, and capital shortages led to high failure rates."

Since the high failure rates were disappointing, we can infer that the SBA did not anticipate those high failure rates. If the actual failure rate was closer to the anticipated failure rate, there would not have been such disappointment.
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Re: Federal efforts to aid minority businesses began in the 1960's when th  [#permalink]

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18 Oct 2012, 15:02
6
Here are my reasons for the answers I chose. They may not all be right, but I figured this is a good way to really get involved in the discussions. So please feel free to chime in. Thx!

1. which of the following best states the central idea of the passage?
(a) the use of mesbic's for aiding minority entrepreneurs seems to have greater potential for success than does the original sba approach.
(b) there is a crucial difference in point of view between the staff and directors of some mesbic's.
(c) after initial problems with management and marketing, minority businesses have begun to expand at a steady rate.
(d) minority entrepreneurs wishing to form new businesses now have several equally successful federal programs on which to rely.
(e) for the first time since 1960, large corporations are making significant contributions to the development of minority businesses.

2. according to the passage, the mesbic approach differs from the sba approach in that mesbic's
(a) seek federal contracts to provide markets for minority businesses
(c) attempt to maintain a specified rate of growth in the minority business sector
(d) rely on the participation of large corporations to finance minority businesses - I chose B but I think I now see others posted D as the answer and I think that makes more sense. "large corporations participate in the development of successful and stable minority businesses by making use of government-sponsored venture capital"
(e) select minority businesses on the basis of their location

3. which of the following does the author cite to support the conclusion that the results of the sba program were disappointing?
(a) the small number of new minority enterprises formed as a result of the program
(b) the small number of minority enterprises that took advantage of the management and technical assistance offiered under the program
(c) the small percentage of the nation's business receipts earned by minority enterprises following the programs, implementation.
(d) the small percentage of recipient minority enterprises that were able to repay federally guaranteed loans made under the program
(e) the small number of minority enterprises that chose to participate in the program

4. which of the following statements about the sba program can be inferred from the passage?
(a) the maximum term for loans made to recipient businesses was 15 years.
(b) business loans were considered to be more useful to recipient businesses than was management and technical assistance. - "mesbic's are the result of the belief that providing established firms with easier access to relevant management techniques and more job-specific experience, as well as substantial amounts of capital, gives those firms a greater opportunity to develop sound business foundations than does simply making general management experience and small amounts of capital available."
(c) the anticipated failure rate for recipient businesses was significantly lower than the rate that actually resulted.
(d) recipient businesses were encouraged to relocate to areas more favorable for business development.
(e) the capitalization needs of recipient businesses were assessed and then provided for adequately.

5. based on information in the passage, which of the following would be indicative of the pragmatism of mesbic staff members?
Ⅰ.a reluctance to invest in minority businesses that show marginal expectations of return on the investments
Ⅱ. a desire to invest in minority businesses that produce goods and services likely to be of use to the sponsoring company
Ⅲ. a belief that the minority business sector is best served by investing primarily in newly established businesses
(a)Ⅰonly
(b) Ⅲ only
(c)Ⅰand Ⅱ only - "minority staff members, who feel that minority entrepreneurs and businesses should be judged by established business considerations. these staff members believe their point of view is closer to the original philosophy of mesbic's." It does talk about investing in established businesses, but not NEWLY established business and so I did not pick III
(d)Ⅱ and Ⅲ only
(e)Ⅰ,Ⅱ and Ⅲ

6. the author refers to the "financial and operating problems"(line 38 ) encountered by mesbic's primarily in order to
(a) broaden the scope of the discussion to include the legal considerations of funding mesbic's through sponsoring companies
(b) call attention to the fact that mesbic's must receive adequate funding in order to function effectively
(c) show that sponsoring companies were willing to invest only \$500,000 of government-sponsored venture capital in the original mesbic's
(d) compare sba and mesbic limits on minimum funding - "while this program enabled many minority entrepreneurs to form new businesses, the results were disappointing, since managerial inexperience, unfavorable locations, and capital shortages led to high failure rates.I figured that's the reference being made with the "financial and operating problems from sba's model.
(e) refute suggestions that mesbic's have been only marginally successful

7. the author's primary objective in the passage is to
(a) disprove the view that federal efforts to aid minority businesses have been ineffective
(b) explain how federal efforts to aid minority businesses have changed since the 1960's
(c) establish a direct link between the federal efforts to aid minority businesses made before the 1960's and those made in the 1980's
(d) analyze the basis for the belief that job-specific experience is more useful to minority businesses than is general management experience
(e) argue that the "social responsibility approach" to aiding minority businesses is superior to any other approach

8. it can be inferred from the passage that the attitude of some mesbic staff members toward the investments preferred by some mesbic directors can best be described as
(a) defensive
(b) resigned
(c) indifferent
(d) shocked
(e) disapproving

9. the passage provides information that would answer which of the following questions?
(a) what was the average annual amount, in dollars, of minority business receipts before the sba strategy was implemented?
(b) what locations are considered to be unfavorable for minority businesses?
(c) what is the current success rate for minority businesses that are capitalized by mesbic's?
(d) how has the use of federal funding for minority businesses changed since the 1960's? - talks about the start of sba in the 1960's, the high failure rate, the transition to mesbic's, and it's increasing success
(e) how do minority businesses apply to participate in a mesbic program?
##### General Discussion
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Re: Federal efforts to aid minority businesses began in the 1960's when th  [#permalink]

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01 Mar 2015, 05:07
I got questions 1 and 4 wrong. It took me 13 minutes to complete.

1. C - I stuffed this one up; my success rate on central idea/premise-type questions needs to be increased! The OA ties up the whole passage vs. my answer choice, and I'd missed the 'mesbic' key word that should have been part of the correct answer.
2. D
3. C
4. B - the OA being C; the relevant line is: ...while the results were disappointing, since managerial inexperience, unfavorable locations, and capital shortages led to high failure rates. On choice B, the passage mentions nothing about the usefulness of management/technical assistance relative to business loans, and it's therefore a stretch to consider one was useful over another.
5. C
6. B
7. B
8. E
9. D
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Re: Federal efforts to aid minority businesses began in the 1960's when th  [#permalink]

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14 Feb 2016, 23:02
2
Hi, that's precisely why Question no.4's answer is C.

Lets look at it this way :

1. The government thought SBA program would be successful. So it started it.
2. But then they replaced SBA with MESBIC.

So, they had previously thought that SBA program will be successful. But it was not. Hence they started MESBIC.
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15 Feb 2016, 10:19
LUTHRASAGAR913 wrote:
CAN SOMEBODY EXPLAIN WHY THE OA OF QUESTION NO. 4 IS C
I HAVE A REASON WHY THE ANSWER SHOULD NOT BE C, LETS ASSUME THAT OA IS RIGHT THEN GOVERNMENT SHOULD HAVE CONTINUE WITH SCHEME INSTEAD OF SCRAPPING IT AND SUBSTITUTING WITH A BETTER POLICY.

"the results were disappointing, since managerial inexperience, unfavorable locations, and capital shortages led to high failure rates"

With mesbic they specifically solve all of those problems (managerial inexperience, unfavorable locations and capital shortages)
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Re: Federal efforts to aid minority businesses began in the 1960's when th  [#permalink]

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30 Jun 2016, 05:07
3
1
This is my logic.

1. which of the following best states the central idea of the passage?
(a) the use of mesbic's for aiding minority entrepreneurs seems to have greater potential for success than does the original sba approach.
Central idea of the passage. It stated that SBA was a failure and here came the great Mesbic.
(b) there is a crucial difference in point of view between the staff and directors of some mesbic's.
Too local. Mentioned only in P3
(c) after initial problems with management and marketing, minority businesses have begun to expand at a steady rate.
Too local. Only mentioned in end of P2
(d) minority entrepreneurs wishing to form new businesses now have several equally successful federal programs on which to rely.
Do they really have different program? Only SBA (unsuccessful) and Mesbic (better) are mentioned
(e) for the first time since 1960, large corporations are making significant contributions to the development of minority businesses.
Maybe it was the first time since 1960. But this is not the central idea. You can maybe infer that it was the first time

2. according to the passage, the mesbic approach differs from the sba approach in that mesbic's
(a) seek federal contracts to provide markets for minority businesses
This is SBA approach
Out of scope. The passage did not mention having minority bussinesses helping out other small busineeses. Only either SBA (Gov to minority) or Mesbic (Gov -> Investment companies -> small companies)
(c) attempt to maintain a specified rate of growth in the minority business sector
"maintain"? did mesbic maintain a growth rate? No mention of mesbic growth rate.
(d) rely on the participation of large corporations to finance minority businesses
Correct. SBA (Gov -> minority) is different with Mesbic (Gov -> investment companies -> minority)
(e) select minority businesses on the basis of their location
No mention of selecting due to location of businesses

3. which of the following does the author cite to support the conclusion that the results of the sba program were disappointing?
Scan P2 for backup data. Realize that it's the number of receipts. Look for "receipts" in answer choice
(a) the small number of new minority enterprises formed as a result of the program
(b) the small number of minority enterprises that took advantage of the management and technical assistance offiered under the program
(c) the small percentage of the nation's business receipts earned by minority enterprises following the programs, implementation.
even 15 years after the program was implemented, minority business receipts were not quite two percent of the national economy's total receipts.
(d) the small percentage of recipient minority enterprises that were able to repay federally guaranteed loans made under the program
(e) the small number of minority enterprises that chose to participate in the program

4. which of the following statements about the sba program can be inferred from the passage?
(a) the maximum term for loans made to recipient businesses was 15 years.
"After 15 years" cannot be inferred to 15-year loan
(b) business loans were considered to be more useful to recipient businesses than was management and technical assistance.
Mentioned of the 3 "since managerial inexperience, unfavorable locations, and capital shortages led to high ..." but did not point out one is superior than others
(c) the anticipated failure rate for recipient businesses was significantly lower than the rate that actually resulted.
Passage mentions: "The results were disappointing" means they anticipate success rate to be high (or failure rate to be low) and actual is the opposite: success rate is low (and failure rate is high)
(d) recipient businesses were encouraged to relocate to areas more favorable for business development.
No mention
(e) the capitalization needs of recipient businesses were assessed and then provided for adequately.

5. based on information in the passage, which of the following would be indicative of the pragmatism of mesbic staff members?
I got this one wrong. I chose A which is I only. Not sure how II is correct...
Ⅰ.a reluctance to invest in minority businesses that show marginal expectations of return on the investments
I is obviously correct to me. Directors prefer "risky investments" = "marginal return on investments"
Ⅱ. a desire to invest in minority businesses that produce goods and services likely to be of use to the sponsoring company
Ⅲ. a belief that the minority business sector is best served by investing primarily in newly established businesses

(a)Ⅰonly
(b) Ⅲ only
(c)Ⅰand Ⅱ only
(d)Ⅱ and Ⅲ only
(e)Ⅰ,Ⅱ and Ⅲ

6. the author refers to the "financial and operating problems"(line 38 ) encountered by mesbic's primarily in order to
Prethink: How mesbic different with SBA, solves prior problems (not enought of funding)
(a) broaden the scope of the discussion to include the legal considerations of funding mesbic's through sponsoring companies
(b) call attention to the fact that mesbic's must receive adequate funding in order to function effectively
"adequate funding" is the key to me
(c) show that sponsoring companies were willing to invest only \$500,000 of government-sponsored venture capital in the original mesbic's
(d) compare sba and mesbic limits on minimum funding
(e) refute suggestions that mesbic's have been only marginally successful

7. the author's primary objective in the passage is to
Scan first word to have the tone of author
(a) disprove the view that federal efforts to aid minority businesses have been ineffective
"disprove" is a pretty strong tone. Do not match with the neutral tone
(b) explain how federal efforts to aid minority businesses have changed since the 1960's
Neutral tone. Stay high level. Good overall objective choice.
(c) establish a direct link between the federal efforts to aid minority businesses made before the 1960's and those made in the 1980's
(d) analyze the basis for the belief that job-specific experience is more useful to minority businesses than is general management experience
(e) argue that the "social responsibility approach" to aiding minority businesses is superior to any other approach

8. it can be inferred from the passage that the attitude of some mesbic staff members toward the investments preferred by some mesbic directors can best be described as
(a) defensive Too strong
(b) resigned
(c) indifferent The staffs obviously felt different enough
(d) shocked No mention of surprise/shock
(e) disapproving Correct. Staffs think that the directors are wrong in their selection criteria

9. the passage provides information that would answer which of the following questions?
(a) what was the average annual amount, in dollars, of minority business receipts before the sba strategy was implemented?
(b) what locations are considered to be unfavorable for minority businesses?
(c) what is the current success rate for minority businesses that are capitalized by mesbic's?
(d) how has the use of federal funding for minority businesses changed since the 1960's?
Match with central idea of passage
(e) how do minority businesses apply to participate in a mesbic program?
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11 Jul 2016, 17:02
2. according to the passage, the mesbic approach differs from the sba approach in that mesbic's
(a) seek federal contracts to provide markets for minority businesses
(c) attempt to maintain a specified rate of growth in the minority business sector
(d) rely on the participation of large corporations to finance minority businesses
(e) select minority businesses on the basis of their location

I don't understand how the answer to this Q2 is D. It's mentioned in the passage that the capital was Govt venture Capital. Then how could they rely on large corporations to 'Finance' the minority business sector. As far as I understood, the role of large corporations was to provide mentorship and market.
I chose A through elimination since all other options were unfit.
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18 Sep 2016, 03:49
3
Question 5. based on information in the passage, which of the following would be indicative of the pragmatism of mesbic staff members?
Ⅰ.a reluctance to invest in minority businesses that show marginal expectations of return on the investments
Ⅱ. a desire to invest in minority businesses that produce goods and services likely to be of use to the sponsoring company
Ⅲ. a belief that the minority business sector is best served by investing primarily in newly established businesses.

premise 1: Mesbic directors think mainly in terms of the "social responsibility approach" and thus seem to prefer deals that are riskier and less attractive than normal investment criteria would warrant.

premise 2 : Mesbic minority staff members are pragmatic in their approach and feel that minority entrepreneurs and businesses should be judged by established business considerations.

option 1 - Low return investment isn't pragmatic - Hence this is correct
option 2 - Good and services produced for the sponsoring company will aid the sponsoring company . This is pragmatic according to the minority staff members point of view - Hence correct.
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01 Feb 2017, 10:28
1. which of the following best states the central idea of the passage?
(a) the use of mesbic's for aiding minority entrepreneurs seems to have greater potential for success than does the original sba approach. TRUE: The passage only talks about Mesbic and how it can prove to be better than previous sba approach.
(b) there is a crucial difference in point of view between the staff and directors of some mesbic's. This is mentioned in the last para, but is not the central idea.
(c) after initial problems with management and marketing, minority businesses have begun to expand at a steady rate. Nowhere is it given that businesses have begun to expand at a steady rate.
(d) minority entrepreneurs wishing to form new businesses now have several equally successful federal programs on which to rely. Several?? Passage only talks about mesbic.
(e) for the first time since 1960, large corporations are making significant contributions to the development of minority businesses. In the passage 1960 does not align with large corporations making significan contributions. In 1960 Sba was introduced.

2. according to the passage, the mesbic approach differs from the sba approach in that mesbic's
(d) rely on the participation of large corporations to finance minority businesses. Only ans that aligns with the passage
This is introduced towards the end of the first para: "Recently federal policymakers have adopted an approach intended to accelerate development of the minority business sector by moving away from directly aiding small minority enterprises and toward supporting larger, growth-oriented minority firms through intermediary companies. in this approach, large corporations participate in the development of successful and stable minority businesses by making use of government-sponsored venture capital."

3. which of the following does the author cite to support the conclusion that the results of the sba program were disappointing?
(c) the small percentage of the nation's business receipts earned by minority enterprises following the programs, implementation.
Even 15 years after the program was implemented, minority business receipts were not quite two percent of the national economy's total receipts.

4. which of the following statements about the sba program can be inferred from the passage?
(c) the anticipated failure rate for recipient businesses was significantly lower than the rate that actually resulted.
Simple ans choice

6. the author's primary objective in the passage is to
(a) disprove the view that federal efforts to aid minority businesses have been ineffective. NOPE: Nowhere does the passage talk about one strategy being more effective than the other. Instead only talk about the downfall of SBA and how MESBIS would, on papern be a better option.
(b) explain how federal efforts to aid minority businesses have changed since the 1960's. YES, Talks bout SBA which started in 1960 and recently the induction of MESBIC.
(c) establish a direct link between the federal efforts to aid minority businesses made before the 1960's and those made in the 1980's. NO:1980 not given is passage, neither do we know anything about pre-1960.
(d) analyze the basis for the belief that job-specific experience is more useful to minority businesses than is general management experience. NO: The start of second para talks about how easier access to relevant management techniques and more job-specific experience, as well as substantial amounts of capital, gives those firms a greater opportunity to develop sound business foundations. No comparison given between job-specific experience and general management experience.
(e) argue that the "social responsibility approach" to aiding minority businesses is superior to any other approach . NO JUST NO!
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Re: Federal efforts to aid minority businesses began in the 1960's when th  [#permalink]

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20 Jul 2017, 00:02
PUNEETSCHDV wrote:
can anyone explain 6th question . why not A ?? and how can we imply need of adequate funding from this context ??

I eliminated the option A on the basis that no where has the author stated that some organisation/ some people feel that federal efforts to aid minority businesses have been ineffective.

Yes it may seem so that the author started in a disapprovement, but no where has he mentions that general view point of public towards federal efforts are negative. Maybe the public generally accepted the first failure but also appreciated the federal efforts for bringing in MESBIC.
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Re: Federal efforts to aid minority businesses began in the 1960's when th  [#permalink]

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28 Jul 2017, 23:16
Quote:
Federal efforts to aid minority businesses began in the 1960's when the small business administration (SBA) began making federally guaranteed loans and government-sponsored management and technical assistance available to minority business enterprises. While this program enabled many minority entrepreneurs to form new businesses, the results were disappointing, since managerial inexperience, unfavorable locations, and capital shortages led to high failure rates. Even 15 years after the program was implemented, minority business receipts were not quite two percent of the national economy's total receipts.

Quote:
4. Which of the following statements about the SBA program can be inferred from the passage?

(A) The maximum term for loans made to recipient businesses was 15 years.

(B) Business loans were considered to be more useful to recipient businesses than was management and technical assistance.

(C) The anticipated failure rate for recipient businesses was significantly lower than the rate that actually resulted.

(D) Recipient businesses were encouraged to relocate to areas more favorable for business development.

(E) The capitalization needs of recipient businesses were assessed and then provided for adequately.

GMATNinja, Could you help with Q4? How do we able to infer and extract "the anticipated failure rate" from the passage?
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Re: Federal efforts to aid minority businesses began in the 1960's when th  [#permalink]

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03 Sep 2017, 00:08
Hey GMATNinja and GMATNinjaTwo

Can you help to explain Q5 and Q7? I got them wrong

5. The author refers to the "financial and operating problems" (line 38) encountered by MESBIC's primarily in order to

(A) broaden the scope of the discussion to include the legal considerations of funding MESBIC's through sponsoring companies
(B) call attention to the fact that MESBIC's must receive adequate funding in order to function effectively
(C) show that sponsoring companies were willing to invest only \$500,000 of government-sponsored venture capital in the original MESBIC's
(D) compare SBA and MESBIC limits on minimum funding
(E) refute suggestions that MESBIC's have been only marginally successful

7. Based on information in the passage, which of the following would be indicative of the pragmatism of MESBIC staff members?

I. A reluctance to invest in minority businesses that show marginal expectations of return on the investments
II. A desire to invest in minority businesses that produce goods and services likely to be of use to the sponsoring company
III. A belief that the minority business sector is best served by investing primarily in newly established businesses

(A) I only
(B) III only
(C) I and II only
(D) II and III only
(E) I, II and III
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Re: Federal efforts to aid minority businesses began in the 1960's when th  [#permalink]

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20 Sep 2017, 20:53
4
pikolo2510 wrote:
Hey GMATNinja and GMATNinjaTwo

Can you help to explain Q5 and Q7? I got them wrong

5. The author refers to the "financial and operating problems" (line 38) encountered by MESBIC's primarily in order to

(A) broaden the scope of the discussion to include the legal considerations of funding MESBIC's through sponsoring companies
(B) call attention to the fact that MESBIC's must receive adequate funding in order to function effectively
(C) show that sponsoring companies were willing to invest only \$500,000 of government-sponsored venture capital in the original MESBIC's
(D) compare SBA and MESBIC limits on minimum funding
(E) refute suggestions that MESBIC's have been only marginally successful

7. Based on information in the passage, which of the following would be indicative of the pragmatism of MESBIC staff members?

I. A reluctance to invest in minority businesses that show marginal expectations of return on the investments
II. A desire to invest in minority businesses that produce goods and services likely to be of use to the sponsoring company
III. A belief that the minority business sector is best served by investing primarily in newly established businesses

(A) I only
(B) III only
(C) I and II only
(D) II and III only
(E) I, II and III

For #5, refer to the following portion:

Quote:
Following early financial and operating problems, sponsoring corporations began to capitalize MESBIC's far above the legal minimum of \$500,000 in order to generate sufficient income and to sustain the quality of management needed.

This portion implies that BEFORE the sponsoring corporations began to capitalize MESBIC's far above the legal minimum, sufficient income was NOT generated and quality of management was NOT sustained (financial and operating problems). This implies that the increased capital was needed to avoid financial and operating problems. In other words, adequate funding (capital) is necessary to avoid financial and operating problems and, thus, function effectively.

Choice (B) is the best answer.

As for #7, MESBIC staffs are compared to MESBIC directors. The directors are said to "prefer deals that are riskier and less attractive than normal investment criteria would warrant," while the staffs would prefer that a more "prudent course" be followed to avoid the disappointing results of the original SBA. This suggests that the directors would be more likely to prefer a deal involving a business that shows marginal expectations of ROI (a deal that is less attractive than normal investment criteria would warrant), while the staffs would be reluctant to invest in such a business. This seems to fit with the first option:

Quote:
I. A reluctance to invest in minority businesses that show marginal expectations of return on the investments

We are also told that the staffs "feel that minority entrepreneurs and businesses should be judged by established business considerations." This evidence further supports the first option, since the staffs would judge minority business by established business considerations (such as ROI expectations).

As for the second option, we are told that the "staff members believe their point of view is closer to the original philosophy of MESBIC's". So what do we know about the original philosophy of MESBIC's? The original function of the MESBIC's was to "provide capital and guidance to minority businesses that have potential to become future suppliers or customers of the sponsoring company." An advantage of this approach is described in the third paragraph: "since potential markets for the minority businesses already exist through the sponsoring companies, the minority businesses face considerably less risk in terms of location and market fluctuation." In other words, those minority businesses would face less risk because they will become suppliers of customers of the sponsoring companies.

Quote:
II. A desire to invest in minority businesses that produce goods and services likely to be of use to the sponsoring company

Thus, a group who's point of view is similar to this original philosophy of MESBIC's would be in favor of investing in businesses that produce goods and services likely to be of use to the sponsoring company. This fits with the original intention of the MESBIC's. Furthermore, it reduces risk, which would appeal to the risk-averse staffs

Quote:
III. A belief that the minority business sector is best served by investing primarily in newly established businesses

As for the third option, there is nothing in the passage suggesting that this is the belief of the staffs. Furthermore, we know that the staffs are risk-averse, and investing in newly established businesses is likely a riskier approach that would be preferred by the directors.

Thus, options I and II fit, and choice (C) is the best answer.
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Re: Federal efforts to aid minority businesses began in the 1960's when th  [#permalink]

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06 May 2018, 17:03
p1 = sba - loans - gov mng - tech assistance >>> new business + disappointment ---> reason for this.
P2 = sol of above prob.MESBIC
P3 - How MESBIC is a right sol for all.
p4 - A problem in MESBIC.

1. Which of the following best states the central idea of the passage?
(A) The use of MESBIC's for aiding minority entrepreneurs seems to have greater potential for success than does the original SBA approach.- correct.
(B) There is a crucial difference in point of view between the staff and directors of some MESBIC's.- p4
(C) After initial problems with management and marketing, minority businesses have begun to expand at a steady rate. - not in any passage
(D) Minority entrepreneurs wishing to form new businesses now have several equally successful federal programs on which to rely. - not in any passage.
(E) For the first time since 1960, large corporations are making significant contributions to the development of minority businesses. --- P3
------------------------------------

2. According to the passage, the MESBIC approach differs from the SBA approach in that MESBIC's - P2
(D) rely on the participation of large corporations to finance minority businesses --- only this option standout.
------------------------------------

3. Which of the following does the author cite to support the conclusion that the results of the SBA program were disappointing?-p1
(C) The small percentage of the nation's business receipts earned by minority enterprises following the programs, implementation
------------------------------------

4. Which of the following statements about the SBA program can be inferred from the passage? p1
(A) The maximum term for loans made to recipient businesses was 15 years. --- 15 yr was given for something else.
(B) Business loans were considered to be more useful to recipient businesses than was management and technical assistance. --- no such comparison
(C) The anticipated failure rate for recipient businesses was significantly lower than the rate that actually resulted. --- the results were disappointing, since managerial inexperience, unfavorable locations, and capital shortages led to high failure rates ; this means this much high fail was not expected.
(D) Recipient businesses were encouraged to relocate to areas more favorable for business development. --- not as such
(E) The capitalization needs of recipient businesses were assessed and then provided for adequately. --- nope
---------------------------------------

5. The author refers to the "financial and operating problems" (line 38) encountered by MESBIC's primarily in order to
(A) broaden the scope of the discussion to include the legal considerations of funding MESBIC's through sponsoring companies
(B) call attention to the fact that MESBIC's must receive adequate funding in order to function effectively ----
(C) show that sponsoring companies were willing to invest only \$500,000 of government-sponsored venture capital in the original MESBIC's
(D) compare SBA and MESBIC limits on minimum funding
(E) refute suggestions that MESBIC's have been only marginally successful
--------------------------------------

6. The author's primary objective in the passage is to
(A) disprove the view that federal efforts to aid minority businesses have been ineffective --- p1
(B) explain how federal efforts to aid minority businesses have changed since the 1960's --- only this one is covering the most out of all.
(C) establish a direct link between the federal efforts to aid minority businesses made before the 1960's and those made in the 1980's --- very less coverage.
(D) analyze the basis for the belief that job-specific experience is more useful to minority businesses than is general management experience --- P4
(E) argue that the "social responsibility approach" to aiding minority businesses is superior to any other approach ---- less coverage.
-------------------------------------

7. Based on information in the passage, which of the following would be indicative of the pragmatism of MESBIC staff members?
pragmatism - an approach that evaluates theories or beliefs in terms of the success of their practical application.
I. A reluctance to invest in minority businesses that show marginal expectations of return on the investments - less chance of success
II. A desire to invest in minority businesses that produce goods and services likely to be of use to the sponsoring company --- smelling success.
III. A belief that the minority business sector is best served by investing primarily in newly established businesses

(A) I only
(B) III only
(C) I and II only - correct
(D) II and III only
(E) I, II and III
------------------------------------

8. It can be inferred from the passage that the attitude of some MESBIC staff members toward the investments preferred by some MESBIC directors can best be described as - p4
such differences in viewpoint ---- this is for difference in directors and staffs

(E) disapproving - correct.
------------------------------------
9. The passage provides information that would answer which of the following questions?
(D) How has the use of federal funding for minority businesses changed since the 1960’s? --- p1
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Re: Federal efforts to aid minority businesses began in the 1960's when th  [#permalink]

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13 Jun 2018, 20:22
GMATNinja, can you please guide me to find the answer for Q5 "The author refers to the "financial and operating problems" (line 38) encountered by MESBIC's primarily in order to" from the passage.

Thanks!

Regards,
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Re: Federal efforts to aid minority businesses began in the 1960's when th  [#permalink]

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23 Jun 2018, 07:57
gsingh0711 wrote:
GMATNinja, can you please guide me to find the answer for Q5 "The author refers to the "financial and operating problems" (line 38) encountered by MESBIC's primarily in order to" from the passage.

Thanks!

Regards,
Gurpreet

Hey gsingh0711,

I believe your question was addressed in an earlier post: https://gmatclub.com/forum/federal-effo ... l#p1929534. Let us know if that doesn't clear up the doubts.

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Re: Federal efforts to aid minority businesses began in the 1960's when th  [#permalink]

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22 Nov 2018, 08:15
thuylnguyen wrote:
This is my logic.

1. which of the following best states the central idea of the passage?
(a) the use of mesbic's for aiding minority entrepreneurs seems to have greater potential for success than does the original sba approach.
Central idea of the passage. It stated that SBA was a failure and here came the great Mesbic.
(b) there is a crucial difference in point of view between the staff and directors of some mesbic's.
Too local. Mentioned only in P3
(c) after initial problems with management and marketing, minority businesses have begun to expand at a steady rate.
Too local. Only mentioned in end of P2
(d) minority entrepreneurs wishing to form new businesses now have several equally successful federal programs on which to rely.
Do they really have different program? Only SBA (unsuccessful) and Mesbic (better) are mentioned
(e) for the first time since 1960, large corporations are making significant contributions to the development of minority businesses.
Maybe it was the first time since 1960. But this is not the central idea. You can maybe infer that it was the first time

2. according to the passage, the mesbic approach differs from the sba approach in that mesbic's
(a) seek federal contracts to provide markets for minority businesses
This is SBA approach
Out of scope. The passage did not mention having minority bussinesses helping out other small busineeses. Only either SBA (Gov to minority) or Mesbic (Gov -> Investment companies -> small companies)
(c) attempt to maintain a specified rate of growth in the minority business sector
"maintain"? did mesbic maintain a growth rate? No mention of mesbic growth rate.
(d) rely on the participation of large corporations to finance minority businesses
Correct. SBA (Gov -> minority) is different with Mesbic (Gov -> investment companies -> minority)
(e) select minority businesses on the basis of their location
No mention of selecting due to location of businesses

3. which of the following does the author cite to support the conclusion that the results of the sba program were disappointing?
Scan P2 for backup data. Realize that it's the number of receipts. Look for "receipts" in answer choice
(a) the small number of new minority enterprises formed as a result of the program
(b) the small number of minority enterprises that took advantage of the management and technical assistance offiered under the program
(c) the small percentage of the nation's business receipts earned by minority enterprises following the programs, implementation.
even 15 years after the program was implemented, minority business receipts were not quite two percent of the national economy's total receipts.
(d) the small percentage of recipient minority enterprises that were able to repay federally guaranteed loans made under the program
(e) the small number of minority enterprises that chose to participate in the program

4. which of the following statements about the sba program can be inferred from the passage?
(a) the maximum term for loans made to recipient businesses was 15 years.
"After 15 years" cannot be inferred to 15-year loan
(b) business loans were considered to be more useful to recipient businesses than was management and technical assistance.
Mentioned of the 3 "since managerial inexperience, unfavorable locations, and capital shortages led to high ..." but did not point out one is superior than others
(c) the anticipated failure rate for recipient businesses was significantly lower than the rate that actually resulted.
Passage mentions: "The results were disappointing" means they anticipate success rate to be high (or failure rate to be low) and actual is the opposite: success rate is low (and failure rate is high)
(d) recipient businesses were encouraged to relocate to areas more favorable for business development.
No mention
(e) the capitalization needs of recipient businesses were assessed and then provided for adequately.

5. based on information in the passage, which of the following would be indicative of the pragmatism of mesbic staff members?
I got this one wrong. I chose A which is I only. Not sure how II is correct...
Ⅰ.a reluctance to invest in minority businesses that show marginal expectations of return on the investments
I is obviously correct to me. Directors prefer "risky investments" = "marginal return on investments"
Ⅱ. a desire to invest in minority businesses that produce goods and services likely to be of use to the sponsoring company
Ⅲ. a belief that the minority business sector is best served by investing primarily in newly established businesses

(a)Ⅰonly
(b) Ⅲ only
(c)Ⅰand Ⅱ only
(d)Ⅱ and Ⅲ only
(e)Ⅰ,Ⅱ and Ⅲ

6. the author refers to the "financial and operating problems"(line 38 ) encountered by mesbic's primarily in order to
Prethink: How mesbic different with SBA, solves prior problems (not enought of funding)
(a) broaden the scope of the discussion to include the legal considerations of funding mesbic's through sponsoring companies
(b) call attention to the fact that mesbic's must receive adequate funding in order to function effectively
"adequate funding" is the key to me
(c) show that sponsoring companies were willing to invest only \$500,000 of government-sponsored venture capital in the original mesbic's
(d) compare sba and mesbic limits on minimum funding
(e) refute suggestions that mesbic's have been only marginally successful

7. the author's primary objective in the passage is to
Scan first word to have the tone of author
(a) disprove the view that federal efforts to aid minority businesses have been ineffective
"disprove" is a pretty strong tone. Do not match with the neutral tone
(b) explain how federal efforts to aid minority businesses have changed since the 1960's
Neutral tone. Stay high level. Good overall objective choice.
(c) establish a direct link between the federal efforts to aid minority businesses made before the 1960's and those made in the 1980's
(d) analyze the basis for the belief that job-specific experience is more useful to minority businesses than is general management experience
(e) argue that the "social responsibility approach" to aiding minority businesses is superior to any other approach

8. it can be inferred from the passage that the attitude of some mesbic staff members toward the investments preferred by some mesbic directors can best be described as
(a) defensive Too strong
(b) resigned
(c) indifferent The staffs obviously felt different enough
(d) shocked No mention of surprise/shock
(e) disapproving Correct. Staffs think that the directors are wrong in their selection criteria

9. the passage provides information that would answer which of the following questions?
(a) what was the average annual amount, in dollars, of minority business receipts before the sba strategy was implemented?
(b) what locations are considered to be unfavorable for minority businesses?
(c) what is the current success rate for minority businesses that are capitalized by mesbic's?
(d) how has the use of federal funding for minority businesses changed since the 1960's?
Match with central idea of passage
(e) how do minority businesses apply to participate in a mesbic program?

I agree with all the other answers but for the 8th question disapproving seems a bit too strong rather than defensive since its the staff's general attitude towards the director's thinking?
And since the director's say/opinion about minority owned business will usually the last it seems to make more logical sense for the staff to have a defensive attitude towards their say/opinion rather than a disapproving attitude.
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Re: Federal efforts to aid minority businesses began in the 1960's when th  [#permalink]

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27 Nov 2018, 11:31
raghavrama21 wrote:
I agree with all the other answers but for the 8th question disapproving seems a bit too strong rather than defensive since its the staff's general attitude towards the director's thinking?

The word "disapproving" is not inherently extreme. It simply means "not approving" or "having an unfavorable opinion." Given what the passage says, it's fair to say that some MESBIC staff members are disapproving of the investments made by some MESBIC directors.

"Defensive" is trickier, because it can be used in multiple ways. When you call a person's attitude defensive, you're not simply saying that the person is trying to defend something. A defensive attitude implies that this person is being hypersensitive, or jumping too quickly to fight back.

For instance, if I mention to my roommate that we should clean the living room, and she were responding defensively, she might say something like, "Why are you accusing me of being dirty? None of the mess in this room is mine. I clean my things up from the living room twice a day." (Of course, my roommate is a one-year-old, and she doesn't talk much, though she's pretty good at roaring like a very tiny bear. And pretty much the entire mess in the living room is hers.)

When we look closely at the passage, this is not how the MESBIC staffers are acting or thinking:

Quote:
Ironically, MESBIC staffs, which usually consist of Hispanic and Black professionals, tend to approach investments in minority firms more pragmatically than do many MESBIC directors, who are usually senior managers from sponsoring corporations. The latter often still think mainly in terms of the "social responsibility approach" and thus seem to prefer deals that are riskier and less attractive than normal investment criteria would warrant. Such differences in viewpoint have produced uneasiness among many minority staff members, who feel that minority entrepreneurs and businesses should be judged by established business considerations. These staff members believe their point of view is closer to the original philosophy of MESBIC's and they are concerned that, unless a more prudent course is followed, MESBIC directors may revert to policies likely to recreate the disappointing results of the original SBA.

The staffers are uneasy and concerned. They don't want to see disappointing results. But their attitude is not defensive (in fact, it's quite cool-headed). So choice (E) is a better match for what we've read than choice (A).

raghavrama21 wrote:
And since the director's say/opinion about minority owned business will usually the last it seems to make more logical sense for the staff to have a defensive attitude towards their say/opinion rather than a disapproving attitude.

Be careful here. You're no longer describing what's written in the passage, so none of this information can be considered when answering the question.

I hope this helps with #8!
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Re: Federal efforts to aid minority businesses began in the 1960's when th  [#permalink]

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22 Dec 2018, 20:51
cmpunk1990 wrote:
Question 5. based on information in the passage, which of the following would be indicative of the pragmatism of mesbic staff members?
Ⅰ.a reluctance to invest in minority businesses that show marginal expectations of return on the investments
Ⅱ. a desire to invest in minority businesses that produce goods and services likely to be of use to the sponsoring company
Ⅲ. a belief that the minority business sector is best served by investing primarily in newly established businesses.

premise 1: Mesbic directors think mainly in terms of the "social responsibility approach" and thus seem to prefer deals that are riskier and less attractive than normal investment criteria would warrant.

premise 2 : Mesbic minority staff members are pragmatic in their approach and feel that minority entrepreneurs and businesses should be judged by established business considerations.

option 1 - Low return investment isn't pragmatic - Hence this is correct
option 2 - Good and services produced for the sponsoring company will aid the sponsoring company . This is pragmatic according to the minority staff members point of view - Hence correct.

On reading the passage again, found the below line that explains II as true.
Line from passage -->:" The MESBIC then provides capital and guidance to minority businesses that have potential to become future suppliers or customers of the sponsoring company."
What the line states --> The above line implies that the minority comp. and the sponsoring company, have the same market/area of interest/business.

I did get this question wrong, in my first attempt. Below is the lesson I learnt.
Strategy to use --> HUNT/LOOK for the key word or similar words.
Re: Federal efforts to aid minority businesses began in the 1960's when th   [#permalink] 22 Dec 2018, 20:51

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