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MCATCritical Analysis andReasoning Skills Workbook2016 Edition

UTEJennifer Wooddell, Senior Editor and Question WriterIBGina Granter, M.A.Alix Claps, M.A.TREdited for Production byJudene Wright, M.S., M.A.Ed., National Content Director, MCAT Program, he Princeton ReviewIShe Princeton Review would also like to thank all the writers and editors of previous editions fortheir contributions.Dhe MCAT is a registered trademark of the Association of American Medical Colleges, which doesnot sponsor or endorse this product.OThe Princeton Review is not ailiated with Princeton University.NCopyright 2014, 2011, 2010, 2009, 2008, 2007, 2005, 2001, 2000, 1999, 1998, 1997 byTPR Education IP Holdings, LLCAll rights reserved.2016 EditionDOhis manual is for the exclusive use of Princeton Review course students, and is not legal for resale.PrincetonReview.com

Practice Passages .1Practice Passages Solutions .47Practice Test 1 .Answer Key .101120125TRPractice Test 1 Solutions .IBMCAT CARS Practice Tests141Answer Key .160Practice Test 2 Solutions .165Practice Test 3 .183ISPractice Test 2 .DAnswer Key . 202207Practice Test 4 .225TPractice Test 3 Solutions .244Practice Test 4 Solutions .249OAnswer Key .NODUTEContents

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UTETRIBMCATCritical Analysis andReasoning SkillsDONOTDISPractice Passages

MCAT CARS WorkbookStudies of public sale of stock by small firms reveal the factthat small companies frequently make financial arrangementsthat are not sound. Indeed, the lack of knowledge on the partof small-firm owners often leads to arrangements with brokersor securities dealers that are not in the best interest of the smallfirms.The condition of the financial markets at any given time hasa direct bearing on the prospects for the sale of capital stock.Entrepreneurs found the early years of the 1980s to be strong fornew-venture stock sales. For example, George Ryan, founder andchairman of CADO Systems Corp., a microprocessor-computermanufacturer, said that going public with a stock sale was easybecause “today’s venture market is so hot that if you had a cornerhot dog stand, you could take it public. There is a push to takecompanies public.” Market conditions do change, however, andtherefore must be studied carefully.ISOne way to sell capital stock is through private placement.This means that the firm’s capital stock is sold to selectedindividuals, who are most likely to be the firm’s employees, theowner’s acquaintances, local residents, customers, and suppliers.Private sale of stock is difficult because the new firm is notknown and has no ready market for its securities. However, theentrepreneur avoids many requirements of the securities lawwhen a stock sale is restricted to a private placement.UTEThe sale of capital stock is a way to obtain money, throughthe sale of stock to individual investors beyond the scope of one’simmediate acquaintances. Periods of high interest rates turnentrepreneurs to this equity market. This involves, of necessity, adilution of ownership, and many owners are reluctant to take thisstep for that reason. Whether the owner is wise in declining touse outside equity financing depends upon the firm’s long-rangeprospects. If there is an opportunity for substantial expansion ona continuing basis and if other sources are inadequate, the ownermay decide logically to bring in other owners. Owning part ofa larger business may be more profitable than owning all of asmaller business.IBOften, the central problem in any business is that moneyis needed to make money. The following discusses the sale ofequity, which is one response to this problem.Common stock may also be sold to underwriters, whoguarantee the sale of securities. The compensation and feespaid to underwriters typically make the sale of securities inthis manner expensive. The fees themselves may range from10 percent to 30 percent, with 18 percent to 25 percent beingtypical. In addition, there are options and other fees that may runthe actual costs higher. The reason for the high expense is, ofcourse, the element of uncertainty and risk associated with publicofferings of stock of small, relatively unknown firms.TRPassage 1 (Questions 1-7)TDHowever, some firms “go public” by making their stockavailable to the general public. These are typically the largersmall-business firms. The reason often cited for a public sale isthe need for additional working capital or, less frequently, forother capital needs. The personal financial objectives of ownersmay also enter into the reasoning behind the public sale of stock.DONOIn undertaking the public sale of stock, the small firm subjectsitself to greater public regulation. There are state regulationspertaining to the public sale of securities, and the Securitiesand Exchange Commission (SEC) also exercises surveillanceover such offerings. The SEC is quite tolerant of small offerings,however, by permitting “Regulation A” offerings to be sold withminimum requirements for financial data and information.2 TPR Education IP Holdings, LLCAdapted from Small Business Management, 6th ed., 1983 South-Western Publishing Co.

Practice Passages1.The passage implies that an owner who chooses not to sellcapital stock despite the prospect of continued expansionis:5.Which one of the following about capital stock can beinferred from the passage?A firm’s employees can only buy private stock inthat firm, not capital stock.B. Those who have capital stock in a company own partof that company.C. The lack of knowledge about capital stock of smallfirm owners leads to many business bankruptcies.D. The sale of capital stock is the most common waybusinesses generate capital.A.B.C.D.3.6.Raising capital without diluting ownershipRaising capital without incurring debtRaising capital with less interference from the SECDesiring the general public to become co-ownersAccording to the passage, under what circumstancesmight owners decide to take their firms public?When they have personal reasons for wanting toraise moneyB. When an underwriter offers to guarantee the sale foran unusually low rate (e.g., 10 percent)C. When they want the firm to grow rapidlyD. When the firm is very small (e.g., a hot dog stand)The condition of financial markets influences thesuccess of businesses.B. The sale of equity is one way for businesses to raisemoney.C. Relatively unknown firms can succeed throughpublic offerings of stock.D. The stock market is intrinsically related to thebusiness world.A.When a firm goes public through an underwriter, all of thefollowing are true EXCEPT that:T4.DISA.the more money the firm raises in the sale, the morethe underwriter profits.B. if no one will buy stock in the new firm, theunderwriter contributes the capital.C. the high fees charged by underwriters may offset thecosts they incur when a company fails.D. the underwriter’s profits are relatively low in thecase of private placement offerings.7.Based on the passage, which one of the followingstatements most accurately describes SEC policy?The SEC keeps a close eye on small firms becausethey frequently make financial arrangements that arenot sound.B. The SEC seeks to protect business owners from therisks of venture capitalism.C. The SEC seeks to protect the public from the risks ofventure capitalism.D. The SEC limits the fees underwriters can charge.A.DONOA.Which of the following best expresses the main idea ofthe passage?IBBased on information from the passage, what mightprompt an owner to sell stock through a private placementoffering?TR2.UTEA.subject to increased regulation.more conservative than might be necessary under thecircumstances.C. likely to lose control of the business.D. sacrificing security for rapid growth.A.B. TPR Education IP Holdings, LLC 3

MCAT CARS WorkbookThe conventional answer of physiology and folk medicinealike is that sleep has a restorative effect; it is an opportunityfor the body to perform mental and physical housekeeping awayfrom the needs of daily living. But the actual evidence for thisview, apart from its common-sense plausibility, seems to besparse. Furthermore, there are some worrisome aspects about thecontention. For example, an animal is exceptionally vulnerablewhen sleeping. Granted that most animals sleep in nests, caves,holes in trees or logs or otherwise recessed or camouflagedlocations. Even so, their helplessness while asleep remainshigh. Our nocturnal vulnerability is very evident; the Greeksrecognized Morpheus and Thanatos, the gods of sleep and death,as brothers.Adapted from C. Sagan, The Dragons of Eden—Speculationson the Evolution of Human Intelligence, 1977 BallantineBooks.DISPrometheus is in a fit of righteous indignation. He hasintroduced civilization to a befuddled and superstitious mankind,and for his pains Zeus has chained him to a rock and set a vultureto pluck at his liver. In the passage following the above quotation,Prometheus describes the principal gifts, other than fire, thathe has bestowed on mankind. They are, in order: astronomy;mathematics; writing; the domestication of animals; the inventionof chariots, sailing ships and medicine; and the discovery ofdivination by dreams and other methods. The final gift strikesthe modern ear as odd. Along with the account in Genesis of theexile from Eden, Prometheus Bound seems to be one of the majorworks in Western literature that presents a viable allegory of theevolution of man—although in this case concentrating much moreon the “evolver” than on the evolved. “Prometheus” is Greek for“foresight,” that quality claimed to reside in the frontal lobes of theneocortex; and foresight and anxiety are both present in Aeschylus’character portrait.UTE At firstSenseless as beasts I gave men sense,possessed them of mind In the beginning, seeing, they saw amiss,and hearing, heard not, but like phantoms huddledIn dreams, the perplexed story of their daysConfounded.IBIn Prometheus Bound Aeschylus writes:But what is sleep good for? There is no doubt that if we stayup too long the body generates neurochemicals that literallyforce us to go to sleep. Sleep-deprived animals generate suchmolecules in their cerebrospinal fluid, and the cerebrospinal fluidof sleep-deprived animals induces sleep when injected into otheranimals who are perfectly wide awake. There must, then, be avery powerful reason for sleep.TRPassage 2 (Questions 1-6)OTWhat is the connection between dreams and the evolution ofman? Aeschylus is perhaps saying that our prehuman ancestorslived their waking lives in a state akin to our dreaming lives; andthat one of the principal benefits of the development of humanintelligence is our ability to understand the true nature andimport of dreams.DONThere are, it seems, three principal states of mind in humanbeings: waking, sleeping, and dreaming. An electroencephalograph,which detects brain waves, records quite distinct patterns ofelectrical activity in the brain during these three states. Brainwaves represent very small currents and voltages produced by theelectrical circuitry of the brain. Typical strengths of such brainwave signals are measured in microvolts. Typical frequencies arebetween 1 and about 20 hertz (or cycles per second)—less than thefamiliar 60 cycles per second frequency of alternating currents inelectrical outlets in North America.4 TPR Education IP Holdings, LLC