Some cities focus on generating new ideas and new products, which

Question

Some cities focus on generating new ideas and new products, which requires a diversified economic base; others on large-scale standardized production, which is better carried out in a more specialized economic environment. Thus, both large, diversified, cities and smaller, specialized, cities are needed. The main issue with specialized cities, however, is that, despite the advantages of specialization (less urban crowding and stronger localization economies, i.e., economies based on the proximity of closely related producers within a particular sector), such cities are exposed to greater risk due to the rise and fall of specific sectors and technologies.

But limiting specialization to reduce risk may mean foregoing important immediate benefits to avoid possible future losses. Insurance by the central government may be a good alternative. However, this is costly, and complete insurance may lead to complacency. Another alternative is to give local governments the power to restructure local economies. This may lead, however, to the involvement of local government in excessively ambitious economic-development policies; not every community can create the next Silicon Valley. Moreover, the link between innovation and diversity seems fairly robust, so highly innovative clusters cannot be bred in highly specialized economic environments. An alternative solution is to encourage labor mobility -but in Europe, for example, this awakens fears about lost regional identities.

1. According to the passage, one possible disadvantage of limiting specialization is that

A. any policy involves some risk, and the level of risk to be expected from limiting specialization is not always clear
B. insurance is available to cover any potential losses resulting from specialization
C. some unexpected and valuable innovations can result from specialization
D. future losses resulting from limiting specialization may outweigh present benefits
E. limiting specialization may involve sacrificing potential short-term benefits

2. With regard to risk, which of the following scenarios is most analogous to the situation of specialized cities, as that situation is portrayed in the passage?

A. Small publishing companies are at risk of being submerged by larger publishing companies.
B. One's personal fortune is at greater risk when one invests it in a single stock than when one invests it in several different stocks.
C. Manufacturing and finding a market for an innovative product usually involves a greater risk than for a traditional product.
D. Athletes who compete as part of a team are at greater risk of not achieving distinction than are athletes who compete as individuals.
E. The farther away from the center one lives in a city, the more one is at risk of losing touch with changes in the city.

3. The passage most strongly implies that a policy of encouraging labor mobility could

A. help promote economic diversity in cities but might be impeded by cultural attitudes
B. increase the levels of certain types of risk without bringing substantial economic benefits
C. increase workforce skill levels in cities and counter fears about loss of regional identities
D. increase innovation while preserving regional identities and keeping cities highly specialized economically
E. reduce regional economic diversity in Europe to a greater extent than elsewhere

Show Spoiler

Attachment:

GMAT-Club-Forum-j1cmhivu.png [ 100.13 KiB | Viewed 3138 times ]

Attachment:

GMAT-Club-Forum-5bx0i3r9.png [ 95.76 KiB | Viewed 3142 times ]

Attachment:

GMAT-Club-Forum-zoua4k1z.png [ 93.24 KiB | Viewed 3139 times ]

Show Answer Question #1

Official Answer

E

Show Answer Question #2

Official Answer

B

Show Answer Question #3

Official Answer

A

Using official mocks already? Add GMAT Club Tests for harder practice, analytics, and explanations without overlapping Official Guide or official mock questions.
Try it now →

Blackcrow1972 · Answer

Q3) The passage suggests that encouraging labor mobility could help mitigate the risks faced by specialized cities, likely by promoting a more diverse economy as workers bring different skills and experiences. However, it also notes that in Europe, this policy may face resistance due to concerns over the loss of regional identities, which is a cultural attitude. This aligns with choice A.

Blackcrow1972 · Answer

Q2) The passage describes specialized cities as being at greater risk due to their dependence on a single sector or technology, similar to how investing in only one stock is riskier than diversifying across several stocks. This analogy aligns with B, as both scenarios involve the concept of "putting all eggs in one basket," increasing vulnerability to changes in a single area.

The other options do not capture the specific nature of risk associated with lack of diversification:

A describes competition from larger companies, not the risk associated with over-specialization.
C refers to risk in innovation, not specialization.
D is about individual versus team performance, which doesn’t relate to economic specialization.
E involves geographic distance and staying informed, which does not parallel the economic risk of specialization.

Azakura16 · Answer

Paragraph one introduces two types of cities based on different economic environments. It then explains that both types are important, but smaller, specialized cities have some vulnerabilities that come with working in a less diversified economic environment.
Paragraph two warns against limiting specialization, as the immediate benefits could outweigh potential future losses. It mentions the alternative of government insurance, but brings up some concerns with that solution. It also mentions the alternative of giving local governments the power to restructure their local economies, and then brings up some potential issues with that suggestion. It brings up the link between innovation and diversity, and offers a solution that could encourage that, but mentions a potential complaint if it were to be attempted in some areas.

Q1: According to the passage, one possible disadvantage of limiting specialization is that 
P2, S1:  But limiting specialization to reduce risk may mean foregoing important immediate benefits to avoid possible future losses 
Best answer is E: limiting specialization may involve sacrificing potential short-term benefits

Q2: With regard to risk, which of the following scenarios is most analogous to the situation of specialized cities, as that situation is portrayed in the passage?  
P1, S3:  The main issue with specialized cities, however, is that...such cities are exposed to greater risk due to the rise and fall of specific sectors and technologies. 
Best answer is B: One's personal fortune is at greater risk when one invests it in a single stock than when one invests it in several different stocks.

Q3: The passage most strongly implies that a policy of encouraging labor mobility could 
P2, S7:  An alternative solution is to encourage labor mobility -but in Europe, for example, this awakens fears about lost regional identities. 
Best answer is A: help promote economic diversity in cities but might be impeded by cultural attitudes

eaat · Answer

1. According to the passage, one possible disadvantage of limiting specialization is that

A. any policy involves some risk, and the level of risk to be expected from limiting specialization is not always clear
B. insurance is available to cover any potential losses resulting from specialization
C. some unexpected and valuable innovations can result from specialization
D. future losses resulting from limiting specialization may outweigh present benefits
E. limiting specialization may involve sacrificing potential short-term benefits

Why can't this answer be D? It's kind of right, no?

guddo · Answer

1. According to the passage, one possible disadvantage of limiting specialization is that

The passage says specialized cities get immediate benefits from specialization, such as less crowding and stronger localization economies. But limiting specialization to reduce future risk may require giving up those immediate benefits.  So the disadvantage is sacrificing present benefits  to avoid  possible future losses .

A. any policy involves some risk, and the level of risk to be expected from limiting specialization is not always clear

Wrong. The passage does not say the risk of limiting specialization is unclear. It says limiting specialization may sacrifice current benefits.

B. insurance is available to cover any potential losses resulting from specialization

Wrong. This is about an alternative to limiting specialization, not a disadvantage of limiting specialization itself.

C. some unexpected and valuable innovations can result from specialization

Wrong. The passage actually connects innovation more strongly with diversity, not with highly specialized environments.

D. future losses resulting from limiting specialization may outweigh present benefits

Wrong. This reverses the passage’s point. The passage says limiting specialization may give up immediate benefits to avoid possible future losses.

E. limiting specialization may involve sacrificing potential short-term benefits

Correct. The passage directly says that limiting specialization to reduce risk may mean foregoing important immediate benefits.

Answer: (E)

shibprasad · Answer

For Question 3: why ans option A is incorrect: help promote economic diversity in cities but might be impeded by cultural attitudes

An alternative solution is to encourage labor mobility -but in Europe, for example, this awakens fears about lost regional identities.
Reason 1: The passage talks about Europe and the ans option is generalising the same.
Reason 2: awakens fears about lost regional identities - Labour mobility - > lost regional identities, but regional identity does not threaten mobility.

guddo · Answer

3. The passage most strongly implies that a policy of encouraging labor mobility could

The passage discusses the risk of specialized cities: if one sector declines, the city is vulnerable. It then considers possible solutions, including government insurance, local restructuring, and finally labor mobility.  The point about labor mobility  is that it could help deal with the risks of specialization, but in Europe it may face resistance because people fear the loss of  regional identity .

A. help promote economic diversity in cities but might be impeded by cultural attitudes

This is correct. Labor mobility could help reduce the risks of overly specialized local economies by allowing workers and economic activity to shift more easily. But the passage says this policy can awaken fears about lost regional identities, which are cultural concerns that could impede it.

B. increase the levels of certain types of risk without bringing substantial economic benefits

This is not supported. Labor mobility is presented as a possible solution, not as something that clearly increases risk without benefits.

C. increase workforce skill levels in cities and counter fears about loss of regional identities

This is incorrect. The passage does not say labor mobility increases skill levels, and it says it awakens fears about lost regional identities, not that it counters them.

D. increase innovation while preserving regional identities and keeping cities highly specialized economically

This is too strong. The passage does not say labor mobility would preserve regional identities; it says the opposite concern may arise.

E. reduce regional economic diversity in Europe to a greater extent than elsewhere

This is not supported. The passage mentions Europe only as an example of where fears about regional identity may be especially relevant.

Answer: (A)

guddo · Answer

2. With regard to risk, which of the following scenarios is most analogous to the situation of specialized cities, as that situation is portrayed in the passage?

The passage says specialized cities can gain benefits from focusing on one sector, but they face greater risk because their fortunes depend heavily on that sector or technology.  The analogy is concentration risk : depending on one thing is riskier than being  diversified .

A. Small publishing companies are at risk of being submerged by larger publishing companies.

This is not parallel. The issue is not small versus large, but dependence on one economic sector.

B. One's personal fortune is at greater risk when one invests it in a single stock than when one invests it in several different stocks.
This is correct. A specialized city is like investing in one stock: if that sector declines, the city is heavily exposed. A diversified city is like investing in several stocks, where risk is spread out.

C. Manufacturing and finding a market for an innovative product usually involves a greater risk than for a traditional product.

This is about innovation risk, not the risk of relying heavily on one sector.

D. Athletes who compete as part of a team are at greater risk of not achieving distinction than are athletes who compete as individuals.

This is not parallel. The passage is about economic vulnerability, not individual recognition.

E. The farther away from the center one lives in a city, the more one is at risk of losing touch with changes in the city.

This is unrelated to the specialization/diversification issue.

Answer: (B)

Some cities focus on generating new ideas and new products, which

Prep Toolkit

Top 5 GMAT Debrief Videos

615 to 715 in 15 Days (Ria's Strategies)

More than Quant/Verbal Abilities: Speed vs. Accuracy

745 with Only Self-Prep and GMAT Club

From 555 to 765: 210-point Improvement

Perfect 805 Score Debrief by Julia

My Rewards

GMAT Reading Comprehension (RC) Questions

Some cities focus on generating new ideas and new products, which

Prep Toolkit

615 to 715 in 15 Days (Ria's Strategies)

More than Quant/Verbal Abilities: Speed vs. Accuracy

745 with Only Self-Prep and GMAT Club

From 555 to 765: 210-point Improvement

Perfect 805 Score Debrief by Julia

My Rewards