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Sub 505 Level|   Business|   Long Passage|                     
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Took 16 minutes to solve all the 8 questions. Got 2nd question incorrect. I understood the reasoning of my mistake from this thread.

When I solve passages related to business, I am confident to answer and able to solve within time. Major problem happens when I get science related passages. Here in GMAT CLUB, i see more science related passages too. I have few questions and I would appreciate a response from experts here.

1. Can we really get such a long list of questions on any passage in actual GMAT or will it range in 3 - 5 questions mostly?
2. When we get RC in the GMAT, how do we know that how many questions are there for this passage? Does GMAT provide some indication when we get RC? - The main reason to ask is my current strategy to give time for reading. If passage has 8 questions, I give 8 min to read so I will read slowly and then go to question. If passage has 4 questions, I will give 4 mins to read and rest 4 min to answer questions. Overall, I consider 2 min time to answer each question.
3. Does science related passages come more often in the actual GMAT?

I would appreciate response to my question. Pardon me if I have posted this to incorrect thread. I am not sure where else can I post such questions so sharing it here.

TommyWallach, VeritasKarishma, egmat

You can expect to see 3 - 4 questions per passage. It will not be known in advance how many questions are based on that passage so allot max 3 mins for the initial reading.
You can expect to see passages from any field including science, business, sociology, history etc. Most of us are comfortable with our field of interest, but make more mistakes when the passage is from a field outside our sphere of knowledge. It is best to read up on other fields too i.e. you should invest some time in reading science articles from popular dailies, magazines etc.
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Can someone explain Q2 of this passage.
I don't understand how we inferred that B to be the correct ans.

Question: It can be inferred from the passage that which of the following is true of majority shareholders in a corporation?

Initially I was also confused because of the use of "present tense - is true". I inferred the question about the current shareholders.
However, in the passage it is mentioned: "because these institutions are prohibited by antitrust laws from owning a majority of a company's stock". This statement suggests that the question is not about the current shareholders, instead the question is asking about the shareholders mentioned in lines 1 -7.

Once we understand this, the question is quite straight forward:

(A) They make the corporation's operational management decisions.
- They defined the company policy - say in five years the company should have a majority stake in sales of a particular product in country X.
Operational management decisions - day to day activities.
- Wrong

(B) They are not allowed to own more than fifty percent of the corporation's stock.
- Wrong
- In fact they owned majority stake. Majority > 50%

(C) They cannot make quick profits by selling their stock in the corporation.
-Correct
-Excerpt from the passage: "Because putting such large amounts of stock on the market would only depress its value, they could not sell out for a quick profit and instead had to concentrate on improving the long-term productivity"

(D) They are more interested in profits than in productivity.
- Wrong
- Not mentioned in the passage

(E) They cannot sell any of their stock in the corporation without giving the public advance notice.
- Wrong
- This is true for the recommended course of action and not for the shareholders in consideration for this question.

Hope the explanation helps!
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Got #89 (Q2) wrong and I selected A. My reasoning was that P1 discussed how individual institutions who are not permitted to own majority shares in a corporation cannot engage in the corporation's decision making; therefore, if you reverse the previous statement for the minority/individual institutions, for majority shareholders, they have the decision making power.
But apparently you are supposed to go back to the first part of P1 where "old capitalists" is mentioned to find the correct answer...

I was able to find the OE shared by a test taker on the Chase Dream forum. Figured I would paste it here in case anybody else is confused on Q2.

Quote:
Inference

An inference is drawn from stated information.To answer this question,look at what the passage says about individual capitalists who owned enough stock to dominate the board of directors and dictate company policy.The logical inference from this information is that these individual capitalists were majority stockholders;they are the only majority shareholders discussed in the passage.Lines 6-8 indicate that these capitalists could not sell out for a quick profit and instead had to concentrate on...1ong-term productivity.

A While majority shareholders might dictate company policy(1ine 4),there is no suggestion that they would make operational decisions.

B The passage does discuss current limitations on minority shareholders,but there is no discussion of limitations on majority shareholders.

C Correct.Lines 2-6 show that individual capitalists,and thus majority shareholders,cannot make quick profits because putting such large amounts of stock on the market would only depress its value.

D In fines 6-8.The author argues exactly the opposite of this point.

E Majority shareholders may sell as much stock as they want;the only constraint they face is the economic one of quickly depressing the share price.

The correct answer is C
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2. It can be inferred from the passage that which of the following is true of majority shareholders in a corporation?

(A) They make the corporation's operational management decisions.
(B) They are not allowed to own more than fifty percent of the corporation's stock.
(C) They cannot make quick profits by selling their stock in the corporation.
(D) They are more interested in profits than in productivity.
(E) They cannot sell any of their stock in the corporation without giving the public advance notice.


This is what is given to us about majority shareholders:
Most large corporations in the United States were once run by individual capitalists who owned enough stock to dominate the board of directors and dictate company policy.
Because putting such large amounts of stock on the market would only depress its value, they could not sell out for a quick profit and instead had to concentrate on improving the long-term productivity of their companies...
... institutions are prohibited by antitrust laws from owning a majority of a company's stock and from actively influencing a company's decision-making...



(A) They make the corporation's operational management decisions.
We are not given that they make operational decisions. The passage only mentions that they make company policy.

(B) They are not allowed to own more than fifty percent of the corporation's stock.
"Majority shareholder" means someone who owns more than 50% stake in a company. Majority is more than 50%.

(C) They cannot make quick profits by selling their stock in the corporation.
Correct. The highlighted part tells us that they cannot sell such large quantities of stock because it will depress prices.

(D) They are more interested in profits than in productivity.
Not given.

(E) They cannot sell any of their stock in the corporation without giving the public advance notice.
The author suggests that any institution holding more than 20% should be made to give a day's notice. It is not given that majority shareholders need to this.

Answer (C)
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In addition, any institution that holds twenty percent or more of a company's stock should be forced to give the public one day's notice of the intent to sell those shares. Unless the announced sale could be explained to the public on grounds other than anticipated future losses, the value of the stock would plummet and, like the old-time capitalists, major investors could cut their losses only by helping to restore their companies' productivity.

Dear VeritasKarishma, GMATNinja - can you please explain the above lines? The solution that they have stated means that any Institution that owns more than 20% or more stock should give one day prior notice.
Why they should gave one day prior notice?
Because if the didn't announce the sale, then the value of the stock would plummet. So, does this mean that Institutions find it difficult to explain and hence the stock would plummet which will help in restoring long term productvity?
If they are going to announce the reasons for their sales then the stock would not plummet and hence long term productivity cannot be met?
Didnt really understand this bit.

Alsi, if you could explain last ques A, B and D and choice
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Hi Experts, (GMATNinja, @VeritasKarishma)
In Question 4 option B, [They seldom engaged in short-term trading of the stock they owned.], isn't ''seldom'' extreme? I mean someone at some time could have sold, despite the reduced profits, due to some financial needs. I eliminated this choice for the same reason.
And chose 'D' after POE.
Where did I go wrong? Please explain.
Thank you.
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Question 4


Mck2023
Hi Experts, (GMATNinja, @VeritasKarishma)
In Question 4 option B, [They seldom engaged in short-term trading of the stock they owned.], isn't ''seldom'' extreme? I mean someone at some time could have sold, despite the reduced profits, due to some financial needs. I eliminated this choice for the same reason.
And chose 'D' after POE.
Where did I go wrong? Please explain.
Thank you.
For an in-depth look at (B) for question 4, check out this post. Here are a few quick thoughts on the issue:

  • The passage states that old-style capitalists "could NOT sell out for a quick profit and instead had to concentrate on improving the long-term productivity of their companies."
  • Although this does not EXPLICITLY tell us that old-style capitalists "seldom engaged in short term trading," it suggests that is the case.
  • Remember -- the question isn't asking for something the author states EXPLICITLY, but merely something he/she SUGGESTS.

Regarding answer choice (D), here are a few key points from the passage:

  • Today, "institutions are prohibited by antitrust laws from owning a majority of a company's stock."
  • "A minority shareholder is necessarily a short term trader."

So antitrust laws definitely explain why today's institutions are short term traders. However, nowhere does the passage suggest that these antitrust laws cased old-style capitalists to play a "much smaller role in the stock market as a result of antitrust legislation," as (D) suggests. In fact, the passage does not address why old-style capitalists play a smaller role in the stock market today.

Also, the passage does state that "the return of the old-style capitalist is unlikely," even if the antitrust laws are eliminated. This provides even more reason to eliminate (D), since it suggests that antitrust laws are not a key reason for the absence of old-style capitalists.

I hope that helps!
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Question 4


Mck2023
Hi Experts, (GMATNinja, @VeritasKarishma)
In Question 4 option B, [They seldom engaged in short-term trading of the stock they owned.], isn't ''seldom'' extreme? I mean someone at some time could have sold, despite the reduced profits, due to some financial needs. I eliminated this choice for the same reason.
And chose 'D' after POE.
Where did I go wrong? Please explain.
Thank you.
For an in-depth look at (B) for question 4, check out this post. Here are a few quick thoughts on the issue:

  • The passage states that old-style capitalists "could NOT sell out for a quick profit and instead had to concentrate on improving the long-term productivity of their companies."
  • Although this does not EXPLICITLY tell us that old-style capitalists "seldom engaged in short term trading," it suggests that is the case.
  • Remember -- the question isn't asking for something the author states EXPLICITLY, but merely something he/she SUGGESTS.

Regarding answer choice (D), here are a few key points from the passage:

  • Today, "institutions are prohibited by antitrust laws from owning a majority of a company's stock."
  • "A minority shareholder is necessarily a short term trader."

So antitrust laws definitely explain why today's institutions are short term traders. However, nowhere does the passage suggest that these antitrust laws cased old-style capitalists to play a "much smaller role in the stock market as a result of antitrust legislation," as (D) suggests. In fact, the passage does not address why old-style capitalists play a smaller role in the stock market today.

Also, the passage does state that "the return of the old-style capitalist is unlikely," even if the antitrust laws are eliminated. This provides even more reason to eliminate (D), since it suggests that antitrust laws are not a key reason for the absence of old-style capitalists.

I hope that helps!

Thank you sir (@GMATNinja).
My doubt is now cleared, and I understood my mistake.
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4 (D) They now play a much smaller role in the stock market as a result of antitrust legislation.

Can we say 4D is wrong because antitrust legislation was placed on the large institutions. We dont know if these legislation applied to Capitalists?

Q5 D option choice - short term trading was discouraged among the capitalists because selling large amounts of stock on the market would only depress its value. But we cannot conclude that there was no short term trading?
Below is the line from the passage which says most large corporations had individual capitalists. So what if there were other corporations where there were short term trading
Most large corporations in the United States were once run by individual capitalists who owned enough stock to dominate the board of directors and dictate company policy

Q8 between B and D - pls explain

VeritasKarishma GMATNinja

Thanks
Nikita
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4 (D) They now play a much smaller role in the stock market as a result of antitrust legislation.

Can we say 4D is wrong because antitrust legislation was placed on the large institutions. We dont know if these legislation applied to Capitalists?

Q5 D option choice - short term trading was discouraged among the capitalists because selling large amounts of stock on the market would only depress its value. But we cannot conclude that there was no short term trading?
Below is the line from the passage which says most large corporations had individual capitalists. So what if there were other corporations where there were short term trading
Most large corporations in the United States were once run by individual capitalists who owned enough stock to dominate the board of directors and dictate company policy

Q8 between B and D - pls explain

VeritasKarishma GMATNinja

Thanks
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4. The author suggests that which of the following is a true statement about people who typify the “old-style capitalist" referred to in line 23?

(A) They now rely on outdated management techniques.
(B) They seldom engaged in short-term trading of the stock they owned.
(C) They did not influence the investment policies of the corporations in which they invested.
(D) They now play a much smaller role in the stock market as a result of antitrust legislation.
(E) They were primarily concerned with maximizing the short-term profitability of the corporations in which they owned stock.

The "old style capitalists" are old style. The capitalists are not like that any more. Hence what role they play now is pointless because they don't exist anymore. Hence, (D) is incorrect. And anyway, the passage doesn't mention antitrust legislation in case of old style capitalists.
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4 (D) They now play a much smaller role in the stock market as a result of antitrust legislation.

Can we say 4D is wrong because antitrust legislation was placed on the large institutions. We dont know if these legislation applied to Capitalists?

Q5 D option choice - short term trading was discouraged among the capitalists because selling large amounts of stock on the market would only depress its value. But we cannot conclude that there was no short term trading?
Below is the line from the passage which says most large corporations had individual capitalists. So what if there were other corporations where there were short term trading
Most large corporations in the United States were once run by individual capitalists who owned enough stock to dominate the board of directors and dictate company policy

Q8 between B and D - pls explain

VeritasKarishma GMATNinja

Thanks
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5. It can be inferred that the author makes which of the following assumptions about the businesses once controlled by individual capitalists?

(A) These businesses were less profitable than are businesses today.
(B) Improving long-term productivity led to increased profits.
(C) Each business had only a few stockholders.
(D) There was no short-term trading in the stock of these businesses.
(E) Institutions owned no stock in these companies.

We know that individual capitalists were majority shareholders and dictated policy and could not trade for a quick profit because it could lead to depressed price. But this does not mean that other minority shareholders did not sell off for a quick profit. Since they would hold only a few shares, their selling wouldn't impact the share price. Only if the majority shareholder put his/her large stock on the market would the value depress.
Hence (D) is not correct.

Also note:

...and instead had to concentrate on improving the long-term productivity of their companies...
...are encouraged to enhance long-term productivity (and hence long-term profitability)


So we can infer that long-term productivity improvement leads to long term profitability.

Answer (B)
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4 (D) They now play a much smaller role in the stock market as a result of antitrust legislation.

Can we say 4D is wrong because antitrust legislation was placed on the large institutions. We dont know if these legislation applied to Capitalists?

Q5 D option choice - short term trading was discouraged among the capitalists because selling large amounts of stock on the market would only depress its value. But we cannot conclude that there was no short term trading?
Below is the line from the passage which says most large corporations had individual capitalists. So what if there were other corporations where there were short term trading
Most large corporations in the United States were once run by individual capitalists who owned enough stock to dominate the board of directors and dictate company policy

Q8 between B and D - pls explain

VeritasKarishma GMATNinja

Thanks
Nikita

8. The passage supports which of the following statements?

(A) Antitrust laws prevent any single shareholder from acquiring a majority of the stock in a corporation.
(B) Institutions that intend to sell a large block of stock in a single corporation must give at least twenty-four hours notice of the sale.
(C) In most corporations it is the board of directors rather than the corporate managers who make policy decisions.
(D) The sudden sale of a large amount of stock in any one corporation makes the value of the stock go down.
(E) The way corporations are currently run, it is unlikely that increased productivity would lead to short-term increases in stock values.


(D) The sudden sale of a large amount of stock in any one corporation makes the value of the stock go down.

...Because putting such large amounts of stock on the market would only depress its value...
Hence, (D) is supported by the passage.

Answer (D)

(B) Institutions that intend to sell a large block of stock in a single corporation must give at least twenty-four hours notice of the sale.

...In addition, any institution that holds twenty percent or more of a company's stock should be forced to give the public one day's notice of the intent to sell those shares...
This is the author's opinion. He/she says this is what should be made to happen. It doesn't happen right now.
Hence, the passage doesn't support that option (B) is what happens.
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For question 2, the majority shareholders could not make profits if they sold their shares in the market. But the correct option states that, "They cannot make quick profits by selling their stock in the corporation." Here, we are saying that the shareholders will share their shares in the corporation, and not in the market. Nothing can be inferred regarding this action from the passage and hence, according to me, this does not make any sense.
Can any experts shed some light on this issue ?
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Adding one more question:
The passage supports which of the following statements?
(A) Antitrust laws prevent any single shareholder from acquiring a majority of the stock in a corporation.
(B) Institutions that intend to sell a large block of stock in a single corporation must give at least twenty-four hours notice of the sale.
(C) In most corporations it is the board of directors rather than the corporate managers who make policy decisions.
(D) The sudden sale of a large amount of stock in any one corporation makes the value of the stock go down.
(E) The way corporations are currently run, it is unlikely that increased productivity would lead to short-term increases in stock values.

I think the answer here is D. To me, the contenders were D and E.

Going through the choices, my thought process was:

A - antitrust laws apply to large institutions only, and the answer of 'any single shareholder' is too broad.
Today, with few exceptions, the stock of large United States corporations is held by large institutions-pension funds, for example-and because these institutions are prohibited by antitrust laws from owning a majority of a company's stock

B - this is a proposal, not a law or regulation, so the passage does not support this choice. This is in the second paragraph.

C - this choice is a tough one. The passage doesn't make explicit the nexus between policy decisions and the board or managers; the only mention is in the first sentence of the passage. But I think the last sentence of the first paragraph implies management are responsible for policy decisions - there's no mention of the board in making decisions. Or put another way, you need to negate the answer by making an inference, and here it's that boards may provide company policy but it's management that makes the decisions.
As a result, United States productivity is unlikely to improve unless shareholders and the managers of the companies in which they invest are encouraged to enhance long-term productivity (and hence long-term profitability), rather than simply to maximize short term profits.

D - I think the relevant line was too clear, making me more than suspicious that I've selected the wrong answer!
Because putting such large amounts of stock on the market would only depress its value, they could not sell out for a quick profit and instead had to concentrate on improving the long-term productivity of their companies.

E - this one looks like a stretch. Using the final line of the first paragraph (again), my take is that companies are currently run to maximise short term profits, but there is no linking of productivity and stock values in the short term. If I was looking for a way to negate the answer, putting on my investor hat, I'd say investors are influenced by quarterly earnings (or similar) so any news that companies are trying to increase productivity should increase the stock price.

As I note above, E was one of my contenders. My rationale at rejecting the answer was that the passage refers only to long-term productivity, so we have nothing about short-term productivity to draw any inferences. It also helps that the relevant part of the passage for choice D was pretty clear (I think it is!). Still, my answer, and therefore my reasoning, could be wrong.

I would love to know the answer for this one if someone is willing to help out.

Hey regarding choice B. I'm not sure it is correct to assume here that a passage needs to support an assertion only if it is a law/regulation? This is too centric to this particular passage talking about laws while the question is a generic one. Moreover, the passage does support this with a clear statement. (The author is suggesting it in the passage, thus the passage is supporting it?) Thoughts here?GMATNinja

Actually, we know that Option B is a recommendation, but the passage does support it, so why is it wrong? It literally answers the question.
On the other hand, in Option E, as per the passage (the lines "unless the announced sale could be explained to the public on grounds other than anticipated future losses, the value of the stock would plummet"), there is a chance of both happening, the price going up or down, so that isn't PERFECTLY supported.

Kindly correct my reasoning.
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anish777

Hmm, I'm not quite sure how you're reading the text here. Are you seeing "in the corporation" and "in the market" as two different ways to sell a stock? "In the corporation" is just modifying the noun "stock." Which stock are they selling? The stock belonging to a certain corporation. "In the market," on the other hand, is modifying the action of selling the stock. Where do we sell stocks? In the market.

What we know from the passage is that when a majority shareholder sells a lot of stock, the price goes down, interfering with profits. The passage elaborates, explaining how majority investors profit by supporting long-term productivity. So yes, we know that if you sell shares of your company's stock (and this is something one does in the stock market), you can't make a quick profit.

anish777
For question 2, the majority shareholders could not make profits if they sold their shares in the market. But the correct option states that, "They cannot make quick profits by selling their stock in the corporation." Here, we are saying that the shareholders will share their shares in the corporation, and not in the market. Nothing can be inferred regarding this action from the passage and hence, according to me, this does not make any sense.
Can any experts shed some light on this issue ?
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I did not understand question 8. D says:

"(D) The sudden sale of a large amount of stock in any one corporation makes the value of the stock go down."

I eliminated D because of the phrasing "any one". Doesn't it require for us to make an assumption that selling a large amount of stock in ANY company will make it go down? What if the company is huge and there are a lot of shares already, so selling them won't make a difference?
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MyNameisFritz
I did not understand question 8. D says:

"(D) The sudden sale of a large amount of stock in any one corporation makes the value of the stock go down."

I eliminated D because of the phrasing "any one". Doesn't it require for us to make an assumption that selling a large amount of stock in ANY company will make it go down? What if the company is huge and there are a lot of shares already, so selling them won't make a difference?
­The supporting text is a generalization and is not limited to any specific type or size of company, so D is still supported. Notice that the answer is also quite vague, and this makes it easier to support. The phrase "large amount" may depend on context: selling $10 million in shares may affect a small company more than it would affect Apple or Nvidia, but we might then not consider $10 million "large" in the latter cases. The main thing, though, is that since the author stated this as a generality, we can say that the general statement is supported. That doesn't mean it will be true in every single case without exception, but it still fits what they told us.
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