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Updated on: 13 Aug 2019, 09:04
Originally posted by Bhartiindia on 11 Jan 2010, 13:28.
Last edited by Sajjad1994 on 13 Aug 2019, 09:04, edited 9 times in total.
Last edited by Sajjad1994 on 13 Aug 2019, 09:04, edited 9 times in total.
Updated - Complete topic (123).
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Question 1
B
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
5%
(low)
Question Stats:
87% (02:45) correct
13%
(02:50) wrong
based on 3135
sessions
History
Date
Time
Result
Not Attempted Yet
Question 2
C
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
75%
(hard)
Question Stats:
41% (01:18) correct 59%
(01:22) wrong
based on 3333
sessions
History
Date
Time
Result
Not Attempted Yet
Question 3
C
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
5%
(low)
Question Stats:
84% (01:06) correct 16%
(01:30) wrong
based on 3165
sessions
History
Date
Time
Result
Not Attempted Yet
Question 4
B
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
35%
(medium)
Question Stats:
63% (01:06) correct 37%
(01:17) wrong
based on 3195
sessions
History
Date
Time
Result
Not Attempted Yet
Question 5
B
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
25%
(medium)
Question Stats:
65% (01:05) correct 35%
(01:17) wrong
based on 3104
sessions
History
Date
Time
Result
Not Attempted Yet
Question 6
B
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
5%
(low)
Question Stats:
87% (00:57) correct 13%
(01:15) wrong
based on 2969
sessions
History
Date
Time
Result
Not Attempted Yet
Question 7
E
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
5%
(low)
Question Stats:
86% (00:25) correct 14%
(00:35) wrong
based on 2816
sessions
History
Date
Time
Result
Not Attempted Yet
Question 8
D
Be sure to select an answer first to save it in the Error Log before revealing the correct answer (OA)!
Difficulty:
75%
(hard)
Question Stats:
46% (01:27) correct 54%
(01:28) wrong
based on 2597
sessions
History
Date
Time
Result
Not Attempted Yet
The Official Guide for GMAT Review 10th Edition, 2003
Practice Question
Question No.: RC 88 ~ 94
Page: 348
Practice Question
Question No.: RC 88 ~ 94
Page: 348
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. 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 and from actively influencing a company's decision-making, they can enhance their wealth only by buying and selling stock in anticipation of fluctuations in its value. A minority shareholder is necessarily a short term trader. 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.
Since the return of the old-style capitalist is unlikely, today's short-term traders must be remade into tomorrow's long-term capitalistic investors. The legal limits that now prevent financial institutions from acquiring a dominant shareholding position in a corporation should be removed, and such institutions encouraged to take a more active role in the operations of the companies in which they invest. 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. Such measures would force financial institutions to become capitalists whose success depends not on trading shares at the propitious moment, but on increasing the productivity of the companies in which they invest.
Since the return of the old-style capitalist is unlikely, today's short-term traders must be remade into tomorrow's long-term capitalistic investors. The legal limits that now prevent financial institutions from acquiring a dominant shareholding position in a corporation should be removed, and such institutions encouraged to take a more active role in the operations of the companies in which they invest. 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. Such measures would force financial institutions to become capitalists whose success depends not on trading shares at the propitious moment, but on increasing the productivity of the companies in which they invest.
1. In the passage, the author is primarily concerned with doing which of the following?
(A) Comparing two different approaches to a problem
(B) Describing a problem and proposing a solution
(C) Defending an established method
(D) Presenting data and drawing conclusions from the data
(E) Comparing two different analyses of a current situation
(A) Comparing two different approaches to a problem
(B) Describing a problem and proposing a solution
(C) Defending an established method
(D) Presenting data and drawing conclusions from the data
(E) Comparing two different analyses of a current situation
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.
(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.
3. According to the passage, the purpose of the requirement suggested in lines 30-33 [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.] would be which of the following?
(A) To encourage institutional stockholders to sell stock that they believe will decrease in value
(B) To discourage institutional stockholders from intervening in the operation of a company whose stock they own
(C) To discourage short-term profit-taking by institutional stockholders
(D) To encourage a company's employees to take an active role in the ownership of stock in the company
(E) To encourage investors to diversify their stock holdings
(A) To encourage institutional stockholders to sell stock that they believe will decrease in value
(B) To discourage institutional stockholders from intervening in the operation of a company whose stock they own
(C) To discourage short-term profit-taking by institutional stockholders
(D) To encourage a company's employees to take an active role in the ownership of stock in the company
(E) To encourage investors to diversify their stock holdings
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.
(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.
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.
(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.
6. The author suggests that the role of large institutions as stockholders differs from that of the “old-style capitalist” in part because large institutions
(A) invest in the stock of so many companies that they cannot focus attention on the affairs of any single corporation
(B) are prohibited by law from owning a majority of a corporation’s stock
(C) are influenced by brokers who advise against long-term ownership of stocks
(D) are able to put large amounts of stock on the market without depressing the stock’s value
(E) are attracted to the stocks of corporations that demonstrate long-term gains in productivity
(A) invest in the stock of so many companies that they cannot focus attention on the affairs of any single corporation
(B) are prohibited by law from owning a majority of a corporation’s stock
(C) are influenced by brokers who advise against long-term ownership of stocks
(D) are able to put large amounts of stock on the market without depressing the stock’s value
(E) are attracted to the stocks of corporations that demonstrate long-term gains in productivity
7. The primary function of the second paragraph of the passage is to
(A) identify problems
(B) warn of consequence
(C) explain effects
(D) evaluate solutions
(E) recommend actions
(A) identify problems
(B) warn of consequence
(C) explain effects
(D) evaluate solutions
(E) recommend actions
The fourth choice is correct. It can be inferred from information given in the third and fourth sentences of the second paragraph: In addition, any institution that holds 20 percent or more . . . the value of the stock would plummet.
The passage does not support the first choice. The author states that large institutions are prohibited from owning a majority of the stock in any one corporation. However, the author does not say whether or not other parties are similarly prohibited.
The second choice is also incorrect. The author proposes that institutions that intend to sell a large block of a corporation's stock should be required to give a day's notice: the author does not say that such institutions are already required to do so.
As for the third choice, the only mention of boards of directors, in the first sentence of the passage, refers to a historical past in which individual capitalists could control boards of directors and dictate company policy. However, the passage does not say anything about what role boards of directors currently play in making policy decisions.
The last choice is incorrect because the passage only discusses the relationship between increased long-term productivity and long-term profitability; it does not say anything about the relationship between increased productivity and short-term stock values.
The passage does not support the first choice. The author states that large institutions are prohibited from owning a majority of the stock in any one corporation. However, the author does not say whether or not other parties are similarly prohibited.
The second choice is also incorrect. The author proposes that institutions that intend to sell a large block of a corporation's stock should be required to give a day's notice: the author does not say that such institutions are already required to do so.
As for the third choice, the only mention of boards of directors, in the first sentence of the passage, refers to a historical past in which individual capitalists could control boards of directors and dictate company policy. However, the passage does not say anything about what role boards of directors currently play in making policy decisions.
The last choice is incorrect because the passage only discusses the relationship between increased long-term productivity and long-term profitability; it does not say anything about the relationship between increased productivity and short-term stock values.
(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.
25 Jan 2010, 17:26
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Hey All,
I just wanted to weigh in here, as there seems to be a discussion about the best way to improve on RC. I really have to weigh in against whoever said that you shouldn't take notes. Note taking is necessary, for a few reasons. First of all, studies show that you retain information much better just when holding a pen in your hand. The knowledge that you're going to force yourself to take notes WILL make you read better. Also, on longer passages, it can serve as a useful outline. Finally, note taking is a process you can improve at. If all you do is hundreds of questions, your gut may get better, but you have no process that can get streamlined. Take notes!
However, most people take notes incorrectly. I'd say the biggest mistake I see in class is students who try to write down the whole passage. This is time-consuming, and counter-productive. The idea is that you're decocting the passage down to its most important elements, not making a cheat sheet for a test (i.e. writing down all the facts in shorthand). As an example, here's how I would outline the passage at issue here.
Main Idea: To explain ways in which institutional investors can be encouraged to think long term, rather than short term.
Paragraph 1: History leading to present state. Investors more concerned with short term because uninvolved in day to day.
Paragraph 2: Ways to improve: make companies more active day to day, able to hold majority share, and announce sale in advance.
That right there is NOT much writing. You cannot argue that this is "too time consuming" to be worth doing. Remember that this is called Reading Comp for a reason. It's not just READING, but COMPREHENSION. If you take notes like a reader, you're not going to do well, and it's going to feel like a pointless exercise. If you take notes like a COMPREHENDER, you're going to find yourself doing better and better. Learn how to take notes that are entirely paraphrased, brief, and focused entirely on structure (rather than being bogged down in content/facts). I promise this will help.
Good luck!
Tommy Wallach
ManhattanGMAT
I just wanted to weigh in here, as there seems to be a discussion about the best way to improve on RC. I really have to weigh in against whoever said that you shouldn't take notes. Note taking is necessary, for a few reasons. First of all, studies show that you retain information much better just when holding a pen in your hand. The knowledge that you're going to force yourself to take notes WILL make you read better. Also, on longer passages, it can serve as a useful outline. Finally, note taking is a process you can improve at. If all you do is hundreds of questions, your gut may get better, but you have no process that can get streamlined. Take notes!
However, most people take notes incorrectly. I'd say the biggest mistake I see in class is students who try to write down the whole passage. This is time-consuming, and counter-productive. The idea is that you're decocting the passage down to its most important elements, not making a cheat sheet for a test (i.e. writing down all the facts in shorthand). As an example, here's how I would outline the passage at issue here.
Main Idea: To explain ways in which institutional investors can be encouraged to think long term, rather than short term.
Paragraph 1: History leading to present state. Investors more concerned with short term because uninvolved in day to day.
Paragraph 2: Ways to improve: make companies more active day to day, able to hold majority share, and announce sale in advance.
That right there is NOT much writing. You cannot argue that this is "too time consuming" to be worth doing. Remember that this is called Reading Comp for a reason. It's not just READING, but COMPREHENSION. If you take notes like a reader, you're not going to do well, and it's going to feel like a pointless exercise. If you take notes like a COMPREHENDER, you're going to find yourself doing better and better. Learn how to take notes that are entirely paraphrased, brief, and focused entirely on structure (rather than being bogged down in content/facts). I promise this will help.
Good luck!
Tommy Wallach
ManhattanGMAT
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20 Jul 2019, 17:28
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p1: to state/ describe the impact on productivity / long-term growth of companies as a result of investor base changes from individual capitalist to institutions and short-term traders
p2: to argue that since the return of capitalists is unlikely a number of measures need to be implemented to change the way existing players invest
Q1
The author is primarily concerned with arguing in favour of implementing specific measures that prevent loss and promote growth of companies.
A is incorrect as the author isn't concerned with comparing
B is correct because in P1 a problem is described and in P2 a solution is proposed
C is incorrect because the author merely mentions an older method and criticises current methods
D is incorrect as no data is presented.
E is incorrect because the author only presents his analysis, no one else
Q2
P1 describes majority shareholders.
Individual capitalists once held, what is inferred as, majority stock such that they dictated company policy to promote long-term gain.
Now, institutions hold the majority of stock, collectively, but individually they are prohibited from owning majority stock and thus influencing company decision making. So it may be inferred that in a classical sense, A Majority shareholder does not exist.
Based on the author's recommendations we know that shareholders NOW are prevented from holding a dominant shareholder position and aren't encouraged to participate in operations.
A is incorrect because we are told that the majori
B this would seem counter to what is bein
C is correct as it is stated in the second sentence of the first para. that "because putting such large amounts of stock on the market would only depress its value..."
D is incorrect because we don't know this. Essentially we are told that majority shareholders chase productivity because THEY CANT sell for a quick profit, but we don't know whether they are more interested in profits.
E no - this is a suggestion made by the author not a requirement
Q3
The requirement in question is that ">=25% equity holders should be forced to give the public one day's notice of the intent to sell the shares". Based on what we know, any significant shareholding sold at once could depreciate the value of the shares or lead others into thinking the motives behind selling are based on expectations of anticipated future losses.
A - no the requirement is to prevent this not encourage it. Incorrect.
B - no, the requirement is related to value, not influence.
C - Yes. This is the only rational thought here that substantiates the motive .
D - No, again the requirement in question is to prevent value fluctuations
E - no. Worst answer of the lot.
Q4
What we know of the old-style capitalist is largely contained in P1:
- they couldn't sell for short-term profit
- they dominated the board and dictated company policy
- they focused on longer-term gains via productivity improvements
A is incorrect. The author is actually encouraging a move towards the management techniques. We also don't know whether these capitalists exist anymore, so "they now" is wrong.
B is the only thing that's supported.. Its inferred that they NEVER engaged in short-term trading, but for someone to "typify" "old-capitalist" style that someone could plausibly "rarely" or (seldom) short-term trade.
C we don't know this. We only know that they influenced company policy.
D it is inferred that the capitalists don't exist in "since the return..", so it would be hard to substantiate whether they play ANY role.
E is completely false - for the facts given.
Q5
A is incorrect. No assertion or statement is made.
B it is stated that these individuals "could not sell out for a quick profit and instead...concentrated on improving the long-term productivity of their companies". Thus it MUST be TRUE that LT Productivity improvements led to increased profits.
C There could be 1 majority capitalist, 100x smaller investors, so this is hardly assumed.
D this isn't assumed, the author merely states that doing so would depreciate the value significantly he didn't say there was NEVER short-term trading
E this isn't assumed. We are merely told that individuals held majority stock. What if a corporation held 1% of the stock?
Q6
They role difference is that Individual institutions do not actively participate in company decision making and their investment strategies are more short-term and speculative.
A is not suggested. They could invest in only 1 company.
B is correct
C is not supported. No mention of brokers.
D is completely false. We are told the opposite in fact.
E how can this substantiate the difference between capitalists and institutions? It relates to motives of institutions.
Q7
Primary function of the second para is explained in the map above.
A - this is false. See map above
B - does not align. See map above
C - no. See map above
D - no. Not to evaluate but to suggest them.
E - Yes. To recommend actions.
Q8
A. Although in p1 it states that "these institutions are prohibited by antitrust laws from owning a majority of a company's stock....". We only know that, "with a few exceptions, the majority of stock is held by institutions", so we cannot assume that antitrust laws apply to individuals as they do institutions.
B. No. This is a recommendation made, not fact.
C. No. We cannot deduce this based on the info given. We are only told of the role capitalists undertook in such decision making.
D. Although a "large amount" is confusing - what is "amount"? we are only told of proportions throughout - this answer is correct as generally we are told of preventions that inhibit short term profit and we are also told of the effects that stem from majority shareholder dumping.
E. This is really muddled statement as it confuses a lot of things said.
p2: to argue that since the return of capitalists is unlikely a number of measures need to be implemented to change the way existing players invest
Q1
The author is primarily concerned with arguing in favour of implementing specific measures that prevent loss and promote growth of companies.
A is incorrect as the author isn't concerned with comparing
B is correct because in P1 a problem is described and in P2 a solution is proposed
C is incorrect because the author merely mentions an older method and criticises current methods
D is incorrect as no data is presented.
E is incorrect because the author only presents his analysis, no one else
Q2
P1 describes majority shareholders.
Individual capitalists once held, what is inferred as, majority stock such that they dictated company policy to promote long-term gain.
Now, institutions hold the majority of stock, collectively, but individually they are prohibited from owning majority stock and thus influencing company decision making. So it may be inferred that in a classical sense, A Majority shareholder does not exist.
Based on the author's recommendations we know that shareholders NOW are prevented from holding a dominant shareholder position and aren't encouraged to participate in operations.
A is incorrect because we are told that the majori
B this would seem counter to what is bein
C is correct as it is stated in the second sentence of the first para. that "because putting such large amounts of stock on the market would only depress its value..."
D is incorrect because we don't know this. Essentially we are told that majority shareholders chase productivity because THEY CANT sell for a quick profit, but we don't know whether they are more interested in profits.
E no - this is a suggestion made by the author not a requirement
Q3
The requirement in question is that ">=25% equity holders should be forced to give the public one day's notice of the intent to sell the shares". Based on what we know, any significant shareholding sold at once could depreciate the value of the shares or lead others into thinking the motives behind selling are based on expectations of anticipated future losses.
A - no the requirement is to prevent this not encourage it. Incorrect.
B - no, the requirement is related to value, not influence.
C - Yes. This is the only rational thought here that substantiates the motive .
D - No, again the requirement in question is to prevent value fluctuations
E - no. Worst answer of the lot.
Q4
What we know of the old-style capitalist is largely contained in P1:
- they couldn't sell for short-term profit
- they dominated the board and dictated company policy
- they focused on longer-term gains via productivity improvements
A is incorrect. The author is actually encouraging a move towards the management techniques. We also don't know whether these capitalists exist anymore, so "they now" is wrong.
B is the only thing that's supported.. Its inferred that they NEVER engaged in short-term trading, but for someone to "typify" "old-capitalist" style that someone could plausibly "rarely" or (seldom) short-term trade.
C we don't know this. We only know that they influenced company policy.
D it is inferred that the capitalists don't exist in "since the return..", so it would be hard to substantiate whether they play ANY role.
E is completely false - for the facts given.
Q5
A is incorrect. No assertion or statement is made.
B it is stated that these individuals "could not sell out for a quick profit and instead...concentrated on improving the long-term productivity of their companies". Thus it MUST be TRUE that LT Productivity improvements led to increased profits.
C There could be 1 majority capitalist, 100x smaller investors, so this is hardly assumed.
D this isn't assumed, the author merely states that doing so would depreciate the value significantly he didn't say there was NEVER short-term trading
E this isn't assumed. We are merely told that individuals held majority stock. What if a corporation held 1% of the stock?
Q6
They role difference is that Individual institutions do not actively participate in company decision making and their investment strategies are more short-term and speculative.
A is not suggested. They could invest in only 1 company.
B is correct
C is not supported. No mention of brokers.
D is completely false. We are told the opposite in fact.
E how can this substantiate the difference between capitalists and institutions? It relates to motives of institutions.
Q7
Primary function of the second para is explained in the map above.
A - this is false. See map above
B - does not align. See map above
C - no. See map above
D - no. Not to evaluate but to suggest them.
E - Yes. To recommend actions.
Q8
A. Although in p1 it states that "these institutions are prohibited by antitrust laws from owning a majority of a company's stock....". We only know that, "with a few exceptions, the majority of stock is held by institutions", so we cannot assume that antitrust laws apply to individuals as they do institutions.
B. No. This is a recommendation made, not fact.
C. No. We cannot deduce this based on the info given. We are only told of the role capitalists undertook in such decision making.
D. Although a "large amount" is confusing - what is "amount"? we are only told of proportions throughout - this answer is correct as generally we are told of preventions that inhibit short term profit and we are also told of the effects that stem from majority shareholder dumping.
E. This is really muddled statement as it confuses a lot of things said.
