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

Passage breakdown

In the first paragraph, the author explains why a government effort failed in the 1960s-1970s

• The government attempted to to aid minority businesses through loans and managerial/technical assistance from SBAs
• The results were disappointing because managerial inexperience, unfavorable locations, and capital shortages led to high failure rates.

In the second paragraph, the author introduces a new government initiative to assist minority businesses

• Larger corporations will sponsor minority businesses through MESBICs.

In the third paragraph, the author explains why the MESBIC initiative is better than the SBA approach

• MESBICs can offer more relevant advice and more capital than SBAs offered
• Also, MESBICs provide an existing market for minority owned businesses

In the fourth paragraph, the author warns about a potential issue with the MESBIC initiative

• MESBIC staff and directors have a difference of opinion.
• The author warns that the directors' route could return this initiative to the failed policy of SBAs it was designed to resolve.

For more on the process of breaking down RC passages, check out this article and our live RC videos.

Explanations for individual questions

• Question 2
• Question 3
  
  • Part 1
  • Part 2
• Question 4
• Question 5
• Question 7
• Question 8

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
(b) encourage minority businesses to provide markets for other 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?

I got questions 1 and 4 wrong. It took me 13 minutes to complete.

My answers:

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

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.

"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)

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
(b) encourage minority businesses to provide markets for other minority businesses
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
Not entirely sure about this one.
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?

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
(b) encourage minority businesses to provide markets for other 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.

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.

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!

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.

GMATNinja, Could you help with Q4? How do we able to infer and extract "the anticipated failure rate" from the passage?

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

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

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.

To ask additional questions not already addressed in this thread, feel free to use the request verbal experts' reply button

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.

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:


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).


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!