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

Question

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

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

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

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

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

(A) The small number of new minority enterprises formed as a result of the program 
(B) The small number of minority enterprises that took advantage of the management and technical assistance offered under the program 
(C) The small percentage of the nation's business receipts earned by minority enterprises following the programs, implementation
(D) The small percentage of recipient minority enterprises that were able to repay federally guaranteed loans made under the program
(E) The small number of minority enterprises that chose to participate in the program

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

(A) The maximum term for loans made to recipient businesses was 15 years.
(B) Business loans were considered to be more useful to recipient businesses than was management and technical assistance.
(C) The anticipated failure rate for recipient businesses was significantly lower than the rate that actually resulted.
(D) Recipient businesses were encouraged to relocate to areas more favorable for business development.
(E) The capitalization needs of recipient businesses were assessed and then provided for adequately.

5 
 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 
 6. The author's primary objective in the passage is to

(A) disprove the view that federal efforts to aid minority businesses have been ineffective 
(B) explain how federal efforts to aid minority businesses have changed since the 1960's 
(C) establish a direct link between the federal efforts to aid minority businesses made before the 1960's and those made in the 1980's 
(D) analyze the basis for the belief that job-specific experience is more useful to minority businesses than is general management experience
(E) argue that the "social responsibility approach" to aiding minority businesses is superior to any other approach

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

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

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

8 
 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 
 9. The passage provides information that would answer which of the following questions?

(A) What was the average annual amount, in dollars, of minority business receipts before the SBA strategy was implemented?
(B) What locations are considered to be unfavorable for minority businesses?
(C) What is the current success rate for minority businesses that are capitalized by MESBIC’s?
(D) How has the use of federal funding for minority businesses changed since the 1960’s?
(E) How do minority businesses apply to participate in a MESBIC program?

GMATNinja · Accepted Answer

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

Since the high failure rates were  disappointing , we can infer that the SBA did not anticipate those high failure rates. If the actual failure rate was closer to the anticipated failure rate, there would not have been such disappointment.

GMATNinja · Answer

For #5, refer to the following portion:

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

Choice (B) is the best answer.

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

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

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

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

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

Thus, options I and II fit, and choice (C) is the best answer.

GMATNinja · Answer

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

LilMykie1986 · Answer

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?

thuylnguyen · Answer

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  
 A

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  
 D

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 
 C

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.
 C

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
 C

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 
 B

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 
 B

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  
 E

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?
 D

cmpunk1990 · Answer

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.

BillyZ · Answer

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

pikolo2510 · Answer

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

gsingh0711 · Answer

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

GMATNinja · Answer

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

raghavrama21 · Answer

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.

GMATNinja · Answer

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!

kanikab · Answer

GMATNinja ,  GMATNinjaTwo  - Can you please explain why Optuon B is incorrect in Q2? I marked it referring to the following line from the passage. "The MESBIC then provides capital and guidance to minority businesses that have potential to become future suppliers or customers of the sponsoring company".

Thanks

zoezhuyan · Answer

any expert can help explain this one? where i located is because i thought this is as a reason to support the conclusion that   results of the SBA program were disappointing , while the discussed location about Q3 is  Even 15 years after the program was implemented, minority business receipts were not quite two percent of the national economy's total receipts.   . i cannot understand why my location is incorrect. please help...

GMATNinja · Answer

Let's take one more look at the answer choice:

In the SBA approach, the SBA makes loans and government-sponsored management/technical assistance available to minority businesses directly. As a reminder, the SBA ("small business administration") is a federal government administration. We see this in Paragraph 1. 
  In the MESBIC approach, the MESBIC ("minority enterprise small business investment company") is an investment company that is run  by a large corporation . In this approach, large corporations act as intermediaries, making use of government capital and providing their own guidance to minority businesses with growth potential. We see this in Paragraph 2. 
  Paragraph 3 mentions that in the MESBIC approach, the sponsoring companies (which are large corporations) provide access to potential markets for minority businesses.

OK, so the essential difference between SBA and MESBIC is that SBA consists of direct assistance to minority firms from the government, while MESBIC brings in large corporations to provide assistance to minority firms (using government funds).

Checking this against choice (B): Does the MESBIC approach "encourage minority businesses to provide markets  for other minority businesses ?

No. In the MESBIC approach, large corporations provide markets for minority businesses. The passage does not describe a situation where minority businesses provide markets for each other. That's why we eliminate (B).

GMATNinja · Answer

Hi  zoezhuyan !

I'm unclear on your request. Is there a specific answer choice that you believe is correct, but don't understand why it's incorrect?

One thing I can tell you is that this question is asking us how the author is measuring the "disappointing" results of the SBA program. Every answer choice points to a specific measurement, challenging us to confirm whether that measurement really matches how the author defines disappointing results in the passage.

I hope this helps a bit? Or feel free to clarify your question, and we'll do our best to answer.

zoezhuyan · Answer

Hi  GMATNinja , I am confused with B and D.
Is B evience about managerial inexperience, is D evidence about captical shortage?

i initional located "since managerial inexperience, unfavorable locations, and capital shortages led to high failure rates.", then i thought i need find something about managerial inexperience, unfavorable locations, and capital shortages" then i was sunked into (B) The small number of minority enterprises that took advantage of the management and technical assistance offered under the program ,(D) The small percentage of recipient minority enterprises that were able to repay federally guaranteed loans made under the program, i though both can be evidence about the managerial inexperience and captical shortage, then both can ve evidence to support the conclusion

please help...

GMATNinja · Answer

Remember that this question is asking us which choice is something  the author cited  to support the author's conclusion. Our task is to identify which choice actually matches the text — more specifically, we want the choice that states the same evidence or reasoning that the author states in order to support the conclusion in this passage.

The conclusion is that the results of the SBA program were disappointing. You're looking in the right place to confirm what the author is citing to support this conclusion:

We have two statements here:

Managerial inexperience, unfavorable locations, and capital shortages led to high failure rates. This supports the conclusion by naming the major causes of disappointing results. 
  Minority business receipts were not quite two percent of the national economy's total receipts. This supports the conclusion by providing direct evidence of disappointing results.

Choice (C) — "The small percentage of the nation's business receipts earned by minority enterprises following the programs, implementation" — is correct because it directly matches the passage — specifically, the second statement listed above.

Choice (B) — "The small number of minority enterprises that took advantage of the management and technical assistance offered under the program" — doesn't match up with either of the statements. Citing the managerial inexperience of entrepreneurs is NOT the same as citing a low rate of participation in management and technical assistance. It doesn't matter that this could logically support the conclusion, because  the author never made this connection in the passage.

Choice (D) — "The small percentage of recipient minority enterprises that were able to repay federally guaranteed loans made under the program" — also doesn't match up with either of the statements. The author never cites a low rate of federal loan repayment in order to support the conclusion of disappointing results of the program. Again, the logic of this statement on its own does not matter, because   the author never makes this connection in the passage.

That's why we should feel very comfortable eliminating (B) and (D).

(C) is the only choice that accurately reflects  what the author cited , so it remains our best option.

I hope this helps!

Sneha2021 · Answer

GMATNinja   KarishmaB

Q4. Which of the following statements about the SBA program can be inferred from the passage?

(D) Recipient businesses were encouraged to relocate to areas more favorable for business development.
 Why D is incorrect?
Since the reason for failure was unfavourable location, SDA might have encouraged for relocating to favourable areas. Hence D can be inferred.
Can you explain what's the meaning of "unfavourable location" in para 1 in terms of impact on minority business?

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

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

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