GMAT Verbal practice questions

Economic historians once treated the shipping container as a minor improvement in packaging. The standard steel box, first carried in quantity when Malcolm McLean's converted tanker Ideal X sailed from Newark to Houston in 1956, seemed too simple to matter. Yet the box changed the cost of trade more than most of the trade agreements negotiated in the decades that followed.

Before containers, cargo was loaded piece by piece. A ship could spend as long in port as at sea, and the cost of moving goods between ship and shore often exceeded the cost of the voyage itself. Theft and damage were routine. The container did not make ships faster; it made ports faster. Once goods were sealed in a box of standard size, cranes could lift them directly onto lorries and trains, and the cost of loading fell from nearly six dollars a ton to a few cents.

The gains did not arrive at once. Containers were useful only when ports, ships, railways and customs authorities all adopted the same dimensions, and agreement on international standards took more than a decade. Ports that invested early, such as Rotterdam and Singapore, grew into regional hubs; older ports whose docks could not accommodate the new ships declined. The lesson some economists draw is that a technology's effect depends less on its own ingenuity than on the network of investments that must adjust around it.

That many migratory birds can orient themselves using the Earth's magnetic field has been established for half a century; how they do so is still debated. For years the leading proposal was that birds carry tiny crystals of magnetite, an iron oxide, that act as compass needles. Iron-rich cells found in the upper beaks of pigeons seemed to confirm it.

That evidence has weakened. Closer study showed that the iron-rich cells in pigeons' beaks were mostly macrophages, immune cells that store iron, rather than nerve cells capable of sensing a field. Attention has since shifted to the eye. A family of light-sensitive proteins called cryptochromes, found in birds' retinas, can form pairs of molecules whose chemical behaviour depends on their alignment with a magnetic field. If such a reaction takes place in the retina, a bird might literally see the field as a pattern overlaid on its vision.

The strongest support for this account is indirect but striking. European robins kept in wooden huts on a university campus could not orient themselves during migration season; when the huts were shielded from the weak radio-frequency noise produced by electronic equipment, the birds oriented normally. A compass based on magnetite would be expected to ignore such weak, rapidly oscillating fields; a chemical compass of the kind cryptochromes could provide would be disrupted by them. The finding does not prove the cryptochrome hypothesis, but it is difficult to explain without some light-dependent chemical mechanism.

An index fund buys every share in a market index in proportion to its weight and makes no judgement about which companies are undervalued. Because it trades little and employs no analysts, it charges a fraction of the fees of an actively managed fund, and after fees most active funds have failed to beat the index over long periods. Investors have responded: in the United States, funds that track indices now hold more money than actively managed funds.

Some economists see a problem in this success. Share prices are informative only because someone is paid to make them so: active investors research companies and buy those they believe to be cheap, pushing prices towards their value. An index fund benefits from that work without contributing to it. If every investor indexed, no one would be correcting prices, and the index itself would become a poor guide to value. This is a version of an argument made in 1980 by Sanford Grossman and Joseph Stiglitz, who showed that markets cannot be perfectly efficient, since if they were, no one would have a reason to pay for the information that makes them so.

The argument is correct in principle but says little about where the limit lies. Prices may need only a modest number of well-informed traders to stay close to value, and as passive investing grows, the rewards for the active investors who remain should rise, attracting new ones. The more pressing question may be a different one: as a few index providers come to hold large stakes in almost every listed company, their influence over how those companies are governed grows, whether or not they choose to exercise it.

Standard economic models assume that people choose the savings plan that best serves their interests, whatever the form in which the choice is presented. Studies of workplace pensions suggest otherwise. When one large American employer changed its retirement plan so that new employees were enrolled automatically unless they opted out, participation among new employees rose from under half to more than four in five. The plan's terms were unchanged; only the default was different.

Several explanations have been offered. Opting in requires effort, and people postpone tasks whose costs are immediate and whose benefits lie decades away. A default may also be read as advice: employees may assume that the employer has chosen a sensible option. And people who are unsure what to do tend to stay with whatever they already have.

Automatic enrolment has since been adopted at national scale, notably in the United Kingdom from 2012. But the same research contains a warning. Employees enrolled by default tended to remain at the default contribution rate, which had been set low so as not to deter anyone, and in the default investment fund. Some who would have chosen to save more, had they made an active choice, ended up saving less. A default is not a neutral starting point; it is itself a choice, and it should be designed as carefully as any other.

Reef-building corals are animals, but most of their food comes from single-celled algae that live inside their tissues. The algae photosynthesise and pass much of the sugar they make to the coral; the coral, in turn, provides shelter and the nutrients in its waste. The partnership explains how reefs flourish in tropical seas that are otherwise poor in nutrients.

When water temperatures rise even one or two degrees above the usual summer maximum for several weeks, the partnership breaks down. The stressed algae produce harmful compounds, and the coral expels them. Without the algae, which give coral much of its colour, the coral's white skeleton shows through its transparent tissue: it has bleached. A bleached coral is not dead, but it is starving, and if the heat persists it will die.

Some corals survive repeated bleaching, and researchers have found that the survivors often host different algae. Certain types of algae tolerate heat better than others, and corals that acquire them after bleaching can withstand temperatures that would have killed them before. This flexibility has been offered as a reason for optimism about reefs in a warming climate. The optimism should be qualified. The heat-tolerant algae tend to give the coral less food, so corals that host them grow more slowly and build reef more slowly. A reef may survive warming in this way, but as a thinner, slower-growing version of itself.