Corporate response appears to have been sub-stantial. According to figures collected in 1977,(20) the total of corporate contracts with minority busi-nesses rose from $77 million in 1972 to $1. lbillionin 1977. The projected total of corporate contractswith minority businesses for the early 1980‘s isestimated to be over 53 billion per year with no(25) letup anticipated in the next decade.Promising as it is for minority businesses, thisincreased patronage poses dangers for them, too.First, minority firms risk expanding too fast andoverextending themselves financially, since most(30) are small concerns and, unlike large businesses,they often need to make substantial investments innew plants, staff, equipment, and the like in orderto perform work subcontracted to them. If, there-after, their subcontracts are for some reason(35) reduced, such firms can face potentially cripplingfixed expenses. The world of corporate purchasingcan be frustrating for small entrepreneurs who getrequests for elaborate formal estimates and bids.Both consume valuable time and resources, and a(40)small company’s efforts must soon result inorders, or both the morale and the financial healthof the business will suffer.
A second risk is that White-owned companiesmay seek to cash in on the increasing apportion-(45) ments through formation of joint ventures withminority-owned concerns. Of course, in manyinstances there are legitimate reasons for jointventures; clearly, White and minority enterprisescan team up to acquire business that neither could(50) acquire alone. But civil rights groups and minoritybusiness owners have complained to ConGREss aboutminorities being set up as “fronts” with White back-ing, rather than being accepted as full partners inlegitimate joint ventures.(55)Third, a minority enterprise that secures thebusiness of one large corporate customer often runthe danger of becoming——and remaining-dependent.Even in the best of circumstances, fierce compe-tition from larger, more established companies(60) makes it difficult for small concerns to broadentheir customer bases: when such firms have nearlyguaranteed orders from a single corporate bene-factor, they may truly have to struggle againstcomplacency arising from their current success.
1. The primary purpose of the passage is to
(A) present a commonplace idea and its inaccuracies
(B) describe a situation and its potential drawbacks
(C) propose a temporary solution to a problem
(D) analyze a frequent source of disaGREement
(E) explore the implications of a finding
2. The passage supplies information that would answerwhich of the following questions?
(A) What federal agencies have set percentage goals for the use of minority-owned businesses in public works contracts?
(B) To which government agencies mustbusinesses awarded federal contracts report theirefforts to find minority subcontractors?
(C) How widespread is the use of minority-ownedconcerns as “fronts” by White backers seeking toobtain subcontracts?
(D) How many more minority-owned businesses werethere in 1977 than in 1972?
(E) What is one set of conditions under which asmall business might find itself financially over-extended?
3. According to the passage, civil rights activistsmaintain that one disadvantage under whichminority- owned businesses have traditionally hadto labor is that they have
(A) been especially vulnerable to governmentalmismanagement of the economy
(B) been denied bank loans at rates comparable tothose afforded larger competitors
(C) not had sufficient opportunity to secure businesscreated by large corporations
(D) not been able to advertise in those media thatreach large numbers of potential customers
(E) not had adequate representation in the centers of government power
4. The passage suggests that the failure of a largebusiness to have its bids for subcontracts resultquickly in orders might cause it to
(A) experience frustration but not serious financialharm
(B) face potentially crippling fixed expenses
(C) have to record its efforts on forms filed with thegovernment
(D) increase its spending with minoritysubcontractors
(E) revise its procedure for making bids for federalcontracts and subcontracts
5. The author implies that a minority-owned concernthat does the GREater part of its business with onelarge corporate customer should
(A) avoid competition with larger, more established concerns by not expanding
(B) concentrate on securing even more business from that corporation
(C) try to expand its customer base to avoid becoming dependent on the corporation
(D) pass on some of the work to be done for the corporation to other minority-owned concerns
(E) use its influence with the corporation to promote subcontracting with other minority concerns
6. It can be inferred from the passage that,comparedwith the requirements of law,the percentage goalsset by “some federal and local agencies ”(lines 14- 15) are
(A) more popular with large corporations
(B) more specific
(C) less controversial
(D) less expensive to enforce
(E) easier to comply with
7. Which of the following, if true, would most weaken theauthor‘s assertion that, in the 1970’s, corporateresponse to federal requirements (lines 18-19) wassubstantial
(A) Corporate contracts with minority-owned businesses totaled $2 billion in 1979.
(B) Between 1970 and 1972, corporate contracts withminority-owned businesses declined by 25 percent.
(C) The figures collected in 1977 underrepresented the extent of corporate contracts with minority-owned businesses.
(D) The estimate of corporate spending with minority-owned businesses in 1980 is approximately $10 million too high.
(E) The $1.1 billion represented the same percentage of total corporate spending in 1977 as did $77 million in 1972.
8. The author would most likely aGREe with which of the following statements about corporate response to working with minority subcontractors?
(A) Annoyed by the proliferation of “front” organizations,corporations are likely to reduce their efforts to work with minority-owned subcontractors in the near future.
(B) Although corporations showed considerable interest in working with minority businesses in the 1970‘s, their aversion to government paperwork made them reluctant to pursue many government contracts.
(C) The significant response of corporations in the 1970‘s is likely to be sustained and conceivably be increased throughout the 1980’s.
(D) Although corporations are eager to cooperate with minority-owned businesses, a shortage of capital in the 1970‘s made substantial response impossible.
(E) The enormous corporate response has all but eliminated the dangers of overexpansion that used to plague small minority-owned businesses.