The Wall Street Journal Weekly Quiz
Covering front-page articles from May 2 – 6, 2005
Professor Guide with Summaries
Developed by: Scott R. Homan Ph.D., Purdue University
Issue #17 Spring 2005
Questions 1 – 12 from The First Section, Section A
Newspaper Circulation Continues Decline, Forcing Tough Decisions
By JULIA ANGWIN and JOSEPH T. HALLINAN
May 2, 2005; Page A1
http://online.wsj.com/article/0,,SB111499919608621875,00.html
The newspaper industry, already suffering from circulation problems, could be looking at
its worst numbers in more than a decade. Circulation numbers to be released today by the
Audit Bureau of Circulations probably will show industry wide declines of 1% to 3%,
according to people familiar with the situation -- possibly the highest for daily
newspapers since the industry shed 2.6% of subscribers in 1990-91. The biggest
publishers may show the largest declines: Gannett Co., which owns about 100
newspapers, says it will be down "a couple of points" from last year's levels. Circulation
at Tribune Co.'s Los Angeles Times is likely to be off in excess of 6% of its most recently
reported figures. Belo Corp.'s Dallas Morning News expects to report daily circulation
down 9% and Sunday circulation down 13% from the year-earlier period. All projected
figures are for the six months ended in March. The Wall Street Journal, published by
Dow Jones & Co., expects to report today that total circulation for the six-month period
declined 0.8% to 2.07 million. Long stuck in a slow decline, U.S. newspapers face the
prospect of an accelerated drop in circulation. The slide is fueling an urgent industry
discussion about whether the trend can be halted in a digital age and is forcing newspaper
executives to rethink their traditional strategies.
1. Current circulation numbers to be released by the Audit Bureau of Circulations
probably will show industry-wide newspaper circulation __________.
a. declined Correct
b. increased
c. stayed the same
d. doubled
2. The Wall Street Journal, published by Dow Jones & Co., expects to report
today that it’s total circulation ___________________
a. increased 8%
b. declined 8%
c. increased 0.8%
d. declined 0.8% Correct
For Big Vendor of Personal Data, A Theft Lays Bare the Downside
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 1 of 18
By EVAN PEREZ and RICK BROOKS
May 3, 2005; Page A1
http://online.wsj.com/article/0,,SB111507095616722555,00.html
ChoicePoint Inc. has 19 billion data files, full of personal information about nearly every
American adult. In minutes, it can produce a report listing someone's former addresses,
old roommates, family members and neighbors. The company's computers can tell its
clients if an insurance applicant has ever filed a claim and whether a job candidate has
ever been sued or faced a tax lien. But last October, after its databases were accessed by a
man bent on identity theft, there was one thing ChoicePoint struggled to do: Figure out
just what records had been stolen. "They said it was a huge task and they didn't have the
staff to do it," says Lt. Robert Costa, head of the Los Angeles County sheriff's department
identity-theft squad. "Apparently their technology wasn't built so you were able to find
the electronic footsteps these guys left." Months passed before ChoicePoint was able to
estimate the number of people whose personal data had been compromised, which it
pegged at 145,000. It couldn't say whether any of the data had been used to steal from the
victims or get fraudulent loans. The sheriff's department, meanwhile, came to more
alarming conclusions. It estimated that data had been downloaded on millions of people,
and used to run up millions of dollars in fraudulent credit-card charges. The vulnerability
of the company's data and its difficulty in tracking the breach point to a paradox.
ChoicePoint and similar data sellers pitch their troves of private information as a hope for
restoring personal security to a society fraught with anxiety over terrorism and crime. The
chief executive of ChoicePoint, Derek Smith, espouses a thesis that society is better off if
everyone can check the background of anyone else. Yet the very existence of these vast
information stockpiles -- vulnerable to both error and poaching -- has spawned a new area
of worry and risk. For a time last year, one could even buy ChoicePoint backgroundcheck kits at Sam's Club for $39.99, though ChoicePoint says it required buyers to prove
valid business purposes for using them. It pulled the product after a few months, saying it
had been just a test.
3. ChoicePoint Inc. sells ____________________.
a. computers
b. personal information about nearly every American adult Correct
c. toys to Sam’s Club
d. computer hacking kits
4. The chief executive of ChoicePoint, Derek Smith, espouses a thesis that society
is better off if _____________________.
a. computers are easy to use
b. toys are inexpensive
c. everyone knows how to hack computer systems
d. everyone can check the background of anyone else Correct
By Accident or Design, Selling T-Shirts Is Big Business on Web
By PUI-WING TAM
May 4, 2005; Page A1
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 2 of 18
http://online.wsj.com/article/0,,SB111515644807923708,00.html
Dan Mowry thought he knew just how to turn his family entertainment newsletter into a
successful online business. Two years ago, he designed an attractive site and loaded it up
with features to entice readers and advertisers: electronic crossword puzzles, a history
quiz and cartoons. Almost as an afterthought, he designed a T-shirt with his company's
logo, a circus ringmaster holding a megaphone. Today the online and print newsletters
have flopped. But the shirts are pulling in up to $3,000 per month, as Mr. Mowry joins
the growing ranks of entrepreneurs profiting from an improbable but lucrative Web
business model: selling T-shirts. All over the Web, bloggers, artists and entrepreneurs are
unexpectedly finding that T-shirts are more reliable moneymakers than the original ideas
that brought them to the Internet. CollegeHumor.com, a site offering jokes and pictures
from college campuses nationwide, sells T-shirts that say "My other shirt has its collar
up," "What Would Ashton Do," and dozens of others. Its parent company, Connected
Ventures LLC, says it takes in roughly $200,000 in monthly revenue from the shirts,
about half of its total income. "A year from now things could be very different, but for
now, T-shirts are a great way to monetize the Internet," says Josh Abramson, one of the
site's founders. It turns out the T-shirt is a perfect fit for online commerce. It captures the
Web's renegade allure and allows surfers to show off their virtual journeys. Easy to make
and deliver, T-shirts often cost $15 or less online.
5. All over the Web, bloggers, artists and entrepreneurs are unexpectedly finding
that ___________ are more reliable moneymakers than the original ideas that
brought them to the Internet.
a. water color pictures
b. oil paintings
c. T-shirts Correct
d. newsletters
6. CollegeHumor.com, a site offering jokes and pictures from college campuses
says it takes in roughly _______ in monthly revenue from shirts.
a. $2000
b. $20,000
c. $200,000 Correct
d. $2,000,000
As Boomers Retire, a Debate: Will Stock Prices Get Crushed?
By E.S. BROWNING
May 5, 2005; Page A1
http://online.wsj.com/article/0,,SB111525281216325319,00.html
For tens of millions of baby boomers and younger workers, the basic long-range financial
plan is simple: accumulate stocks and bonds while working, then slowly sell them off to
keep up a comfortable lifestyle in retirement. Not so fast, says Jeremy Siegel, the
Wharton School finance professor well-known until now for recommending stocks as a
long-term investment. In speeches and a new book, he is warning that a flood of boomer
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 3 of 18
retirees with trillions of dollars of assets to sell over the next 20 to 40 years threatens to
crush stock and bond prices. He says it will take a massive investment in U.S. stocks by
people in India, China and other developing countries to prevent a market meltdown.
Robin Brooks, an economist at the International Monetary Fund, scoffs at the warning.
He thinks the wealthy individuals who own a large percentage of U.S. stock won't need to
sell, and companies may boost dividends so retiree investors can hang on to their shares.
As politicians debate Social Security, economists are debating the future of another plank
of Americans' retirement plans: the stock market. The ratio of working-age people to
retirees will decline over the next 30 years to an estimated 2.6 to 1 from 4.9 to 1 today.
Simple supply-and-demand economics suggests that as retirees dump their holdings into
a thin market, stock prices could plummet.
7. Jeremy Siegel, the Wharton School finance professor is warning that a flood of
boomer retirees with trillions of dollars of assets to sell over the next 20 to 40
years threatens to _______ stock and bond prices.
a. increase
b. decrease Correct
c. double
d. triple
8. The ratio of working-age people to retirees will ________ over the next 30
years.
a. increase
b. double
c. stay the same
d. decline Correct
To Preserve Forests, Supporters Suggest Cutting Some Trees
By JAMES P. STERBA
May 5, 2005; Page A1
http://online.wsj.com/article/0,,SB111525422066025351,00.html
WESTON, Mass. -- To understand the latest threat to one of the largest naturally
reforested regions on the planet -- the Northeastern U.S. -- it helps to drop in on
"volunteer day" in the town forest of this wealthy community outside of Boston.
A local tree surgeon gives chain-saw lessons. Brian Donahue, a college professor, offers
log-splitting tips. Volunteers stack split wood to dry. The logs are from a handsome black
oak, perhaps 70 years old, dismembered with a chain saw two days earlier while a class
of Weston High School seniors watched. Each year, the town topples about 200 trees in
its 1,700-acre forest and sells them, mostly for firewood, but occasionally for lumber.
No, this isn't the threat. Just the opposite. Weston's token logging effort was designed to
teach children and their parents that it's OK, even wise, to cut down local trees and use
them. That's a tough message to sell in exurbia, the semirural areas where affluent
Americans are moving in growing numbers. Most of these newcomers abhor tree-cutting,
foresters say. But Mr. Donahue, a 49-year-old environmental historian at Brandeis
University, has been selling this message for 25 years in Weston: The best way to save
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 4 of 18
forest and farm land from developers is to get local residents to value it by using it in a
hands-on way. They become part of a "working landscape" like farmers of old, he says.
Besides, lumber has to come from some place. Producing more of it locally, he says, is
more environmentally responsible, than, say, pillaging wilderness. And, tree-cutting done
right doesn't have to cause environmental damage or ruin views and property values, he
says. Cutting some trees can boost a forest's overall health, promoting regeneration,
improving wildlife habitat and increasing species diversity.
9. College professor Brian Donahue’s logging efforts are designed to teach
children and their parents that it's _________ to cut down local trees and use
them.
a. wise Correct
b. shameful
c. a waste of resources
d. environmentally harmful
10. Semi-rural areas where affluent Americans are moving in growing numbers is
called _______________.
a. rural-urbia
b. suburbia
c. exurbia Correct
d. new-urbia
Environmentalists Hope a New Movie Will Help Lemurs
By MICHAEL M. PHILLIPS
May 6, 2005; Page A1
http://online.wsj.com/article/0,,SB111533904631326408,00.html
ANDASIBE, Madagascar -- The lemurs were right next to the road just a short walk from
the lodge, munching on bamboo and frolicking with their babies. "Is that cute or what?"
exclaimed Russ Mittermeier, president of Conservation International and one of the
world's foremost experts on the rare primates. It was a tourist-brochure moment.
Well, yes, except for the black, whip-like leech that had just dropped onto Mr.
Mittermeier from the moist leaves above. "Just roll it up and step on it," he said.
But it was a reminder of how much work lies before him as he seeks to turn the remote
African country into a premier ecotourism destination. At the end of this month,
DreamWorks Animation SKG Inc. will release a new movie called "Madagascar," and
Conservation International, an aggressive, well-connected American environmental
group, wants to make sure the country doesn't let the free Hollywood publicity slip
through its opposable thumb and forefinger. Executives at CI, as it is known, are pulling
strings as fast as they can in California and Madagascar, an island a little larger than
California, to make sure the movie generates the sort of tourism that helps save the
country's spectacular, and increasingly endangered, forests and animals. Within a few
months, they think, thousands of moviegoers will decide they'd like to see the real
Madagascar, and the country had better get ready.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 5 of 18
CI environmentalists believe carefully planned ecotourism will bring jobs and money to
the villages near the forests, giving the locals an incentive not to cut down the trees or eat
the wildlife. But Madagascar can't compete with Kenya or South Africa for lion-watching
safaris. The country has none, except for the animated lion in "Madagascar" who escapes
with a zebra, hippo and giraffe from New York's Central Park Zoo and, through a series
of misadventures, ends up washing ashore in Madagascar and meeting lemurs.
So CI, which is based in Washington, and Malagasy organizations are trying to brand the
real Madagascar as a paradise of mammals, reptiles, amphibians and birds found nowhere
else in the world. Most famously, Madagascar is the only place that has true lemurs -- 69
species and subspecies of them -- 24 of which are endangered. For millions of years, the
animals in Madagascar evolved without a human presence. Many have had a hard time
surviving since people began arriving here 1,500 or 2,000 years ago, mostly from
Indonesia and the African mainland. Nine-foot-tall elephant birds went extinct, as did a
type of lemur the size of a gorilla. Now, 90% of the forests are gone, mostly cut down for
lumber or farming. In the field, Mr. Mittermeier carries a pocket tape recorder with lemur
calls, which he plays when he wants to stir up the Indri lemurs or rare Diademed Sifaka
lemurs. The Indri call sounds like the song of the humpback whale, speeded up to 45
rpm. "They're not terribly bright," Mr. Mittermeier concedes. But "they're very pretty.
They're wonderful animals. They're not like monkeys or apes." CI isn't like other
environmental groups. It does no direct-mail fund raising and has just 4,000 donors,
many very wealthy, who provide it with an annual budget of $120 million. The group,
created in 1987, funds everything from scientific research to protected areas in
developing countries. Its board is a lineup of luminaries from business, science and
Hollywood, including Wal-Mart Stores Inc. Chairman Rob Walton, Queen Noor of
Jordan and actor Harrison Ford. The group regularly escorts its major donors to rain
forests and deserts so they'll know how their money is being spent. CI's chief executive,
Peter Seligmann, first realized what DreamWorks was up to last November, while he was
showing Mr. Walton around Madagascar. At a lodge one day, he was approached by
Sylvia Stanat, a retired North Carolina virologist who mentioned that her son was
working on a new film called "Madagascar."
11. Madagascar is the only place that has true _________.
a. spider monkeys
b. lemurs Correct
c. white hippos
d. Nine-foot-tall elephant birds
12. For millions of years, the animals in Madagascar evolved without a _______
presence.
a. primate
b. raptor
c. lion
d. human Correct
Questions 13 – 17 from Marketplace, Section B
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 6 of 18
Web Sites That Exist Only to Sell Advertising Proliferate on Internet
May 2, 2005; Page B1
By LEE GOMES
http://online.wsj.com/article/0,,SB111498546961221622,00.html
Before I tell you about the remarkably useful and completely free information utility I've
been using, I should describe why I needed it in the first place. But that requires, in
addition, a lament about the current sorry state of the World Wide Web. As it does almost
everywhere, spring in my neighborhood means the commencement of long-delayed home
repairs. In setting about on these projects, I naturally planned to use the Web as a
resource to not only bone up on topics like roof repair, but also to find experienced and
honest local trades people to hire. How lucky we are, thought I, to be able to do spring
cleaning in the age of broadband. What I actually found online was a different story. No
matter what I searched for, I ended up with a distressingly large percentage of what might
be called second-generation Web spam. (While mostly associated with email, "spam" is
also used to describe undesirable search results.) This is not the search spam of the early
Internet, where you would search for "Disney" and instead get a sex page. Rather, it's
new and improved spam: pseudo-useful pages that are usually just shells for ads.
In many cases, a page might at first glance seem like a guide to your topic. But after a
minute or two, it becomes evident that the information is virtually useless but is
surrounded by an ocean of ads. In other cases, you find "referral services" -- dozens of
them -- that promise to put you in touch with reputable contractors. But these sites inspire
little confidence that the contractors deemed reputable aren't simply those who have
written the Web site operator a check. (A dead giveaway to these sites, by the way, is
their abundant use of stock photos of improbably attractive, well-dressed people
conferring enthusiastically on the telephone.) Noted search watcher Danny Sullivan says
there is no specific word for these kinds of sites. (Folks with an historical bent might
refer to them as Potemkin Web sites because they are all facades.) What's behind them
isn't anyone with any particular interest or experience in what you're searching for, but
instead someone who is trying to make money from the simple fact that you have arrived
at the page. Meanwhile, though, the sites are cluttering up the Internet and making it
vastly less useful, certainly for what I was trying to use it for.
13. According to the story by Lee Gomes second-generation Web spam is _____.
a. pseudo-useful pages that are usually just shells for ads Correct
b. lists of useable email addresses
c. false advertisements
d. web sites with only stock photos
Nuts-and-Bolts Savings
Airlines Make More of Their Own Parts; Jettisoning a $719 Toilet Seat
By MELANIE TROTTMAN May 3, 2005
http://online.wsj.com/article/0,,SB111507641662222686,00.html
FORT WORTH, Texas -- When ordering a replacement for a small engine part during
routine maintenance on a Boeing 767 airplane last year, American Airlines mechanic
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 7 of 18
Fred Amato was shocked to see a $146 price tag on the tiny piece of metal sold by
Boeing Co. He figured there was only about 50 cents of material in the quarter-size piece
of aluminum. "I thought, 'This is outrageous!' " he says. Now, AMR Corp.'s American
makes the frequently replaced part in its own machine shop for just $5.24 each, saving
the airline $170,000 a year. There isn't much cash-strapped airlines can do about the
skyrocketing cost of fuel, but they are gaining more control over the rising cost of plane
parts -- another huge expense as carriers rejuvenate their aging planes piece by piece to
keep them flying. From engine to lavatory, typically more than half the parts on a plane
will be replaced or repaired over its 30-year average life span, industry experts say. Many
parts are replaced repeatedly. An oversupply of passenger seats and low fares are eroding
profit in the industry, forcing airlines to find new ways to lower expenses. One big target
is maintenance, which accounts for as much as 20% of the cost of operating an airplane,
estimates aircraft maker Boeing Co. About half of that is paying for materials, which
include replacement parts that can cost from less than $10 for nuts and washers to tens of
thousands of dollars for an engine part. With parts prices rising 5% a year on average,
airlines are seeking inexpensive suppliers and, increasingly, figuring out how to make the
parts themselves at significantly reduced cost. In-house manufacturing is one of the
things that has helped American slash 32% off the average materials cost of a Boeing
777's visit to the maintenance hangar, to $67,659 from $100,000 in 2003. Continental
Airlines says it saves nearly $2 million a year by making some airplane parts itself. The
carrier focuses on making interior parts, such as tray tables and window shades, in its 15person Thermoform Shop in Houston. After discovering it could mold its own plastic
toilet seats for its Boeing 757 aircraft, the airline now spends $88 a seat instead of paying
the $719 original manufacturer's price. Likewise, Continental makes first-class bathroom
mirrors for $460 instead of paying nearly $3,000. The savings underscore how bloated
airlines' costs have become over time, and how reining them in doesn't happen overnight.
Just the engine on an MD80 plane has more than 20,000 parts. Safety considerations
come before cost savings in the government-monitored industry, and every part must
meet Federal Aviation Administration guidelines. Getting approval to make a part inhouse can require months of government scrutiny. Even switching to a less expensive
carpet requires meeting strict flammability standards. While airlines have been making
some of their own aircraft parts for decades, there is a growing emphasis on the practice
as carriers encourage employees to scour budgets for overpriced items. Since 2000, the
volume of parts made in American's fabrication shop has risen 17%. "There's not a day
that goes by that a mechanic doesn't come up and say, 'Can you believe we're paying this
much for this part?' " says Charles Lee, a production supervisor at American's Alliance
maintenance base in Fort Worth. Original manufacturers like Boeing and Airbus justify
high prices by the amount of time and money they invest to develop and test new parts.
The cost of materials, too, has risen. But as prices go up and American's fleet grows older
-- the average age of their planes was 12.2 years at the start of this year, compared with
10.7 years in 2000 -- American sees a growing opportunity for cost savings.
14. To save money many airlines are now_______________.
a. buying older airplanes
b. delaying all maintenance
c. firing highly paid mechanics
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 8 of 18
d. encouraging employees to scour budgets for overpriced items Correct
Companies Try Keeping Ice Cream Frozen, Emissions Down
By JEFFREY BALL
May 4, 2005; Page B1
http://online.wsj.com/article/0,,SB111517293488824142,00.html
Coke, the Good Humor man and McDonald's have a temperature problem: The same
chemical that makes their products cold is making the atmosphere warm. Coca-Cola Co.
and Unilever PLC, whose ice-cream brands include Good Humor and Ben & Jerry's, have
millions of refrigerated beverage machines and ice-cream freezers in locations worldwide. McDonald's Corp. has thousands of restaurants, each with big refrigeration rooms
and sundae machines. All these contraptions, it now turns out, are global-warming
hazards. The machines use a chemical refrigerant called HFCs, or hydrofluorocarbons.
When companies began rolling out HFCs as a refrigerant about a decade ago, they were
supposed to be helping the environment. The chemical they were replacing -- CFCs, or
chlorofluorocarbons -- had been linked to the big environmental issue of the 1980s,
ozone-layer depletion. Now, HFCs are being fingered as a culprit in today's
environmental hot-button issue: global warming. One ton of HFCs does as much
atmospheric damage as 1,300 tons of carbon dioxide, the better-known global-warming
gas, according to the United Nations. As a result, companies are scrambling to phase out
the HFCs they just phased in.
15. Millions of refrigerated beverage machines and ice-cream freezers in locations
world-wide are ____________ hazards.
a. germ
b. biological
c. entrapment
d. global-warming Correct
Tech-Savvy Blackmailers Hone A New Form of Extortion
By CASSELL BRYAN-LOW
May 5, 2005; Page B1
http://online.wsj.com/article/0,,SB111525378869925341,00.html
Michael Alculumbre, who heads a small British online-payment processing company,
was driving back from a recent meeting when he got a troubling phone call. It was a
colleague telling him that the company's Web site was under attack by cyberblackmailers. "You can ignore this email and try to keep your site up, which will cost you
tens of thousands of dollars in lost customers," read a message signed "Tony Martino."
"Or you can send us $10K bank wire to make sure that your site experiences no problems
+ we will give you our protection for a year," said the email, which was reviewed by The
Wall Street Journal. Over the next four days, the company suffered repeated barrages of
data fired at its servers, paralyzing the payment system and leaving the retailers who rely
on it unable to process client payments for hours at a time.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 9 of 18
The four-day siege highlights one of the latest trends in online crime: Crooks are using
the Internet to perpetrate extortion schemes from afar. Behind the attacks are bot viruses,
computer code that enables hackers to hijack as many as tens of thousands of far-flung
computers. The hackers then rent out these rogue networks to other criminals for between
a few cents and $1 per machine, security experts say. The criminals, in turn, can use this
vast and anonymous computing power to aim floods of data at a company's computer
system, seeking to knock it out of action.
16. Michael Alculumbre, who heads a small British online-payment processing
company, was driving from a recent meeting when a colleague told him that the
company's Web site was under attack by _________.
a. religious terrorist
b. grade school computer hackers
c. cyber-blackmailers Correct
d. Principality of Sea-land based computer hackers
Cartridges for a Cause
Schools Collect Empty Inkjets And Sell Them to Brokers, Who Resell to Be Refilled
By PUI-WING TAM
May 6, 2005; Page B1
http://online.wsj.com/article/0,,SB111533674004326330,00.html
David Wood makes a good living by asking people for their empties -- empty printer
cartridges, that is. To make his business pay, Mr. Wood does a lot of asking. Every three
months he visits about 345 schools and as many as 20 churches dotted across his home
state of North Carolina. He also phones about 15 schools a day, as well as several Boy
Scout and Girl Scout troops. These schools, churches and other nonprofit groups
comprise Mr. Wood's grass-roots army of collectors, helping him gather a total of about
9,400 empty inkjet and laser cartridges a month. He pays an average of $2.50 for each
inkjet cartridge. Then, his Raleigh, N.C., business, called Kartridges for Kidz, resells the
empties for an average $5.50 apiece to remanufacturers who will recondition them, refill
them and offer them for sale at 30% to 50% less than new brand-name cartridges.
"I'm basically asking for other people's trash, which is the beautiful thing about this,"
says Mr. Wood, whose business brings in monthly revenue of about $60,000.
Mr. Wood is one in a growing cadre of cartridge brokers that helps nonprofit groups raise
funds, encourages recycling and supplies a network of mostly small remanufacturers that
offer consumers a lower-cost option for running their printers. It is a win-win proposition
in many respects, except for the big printer makers such as Hewlett-Packard Co. and
Lexmark International Inc. Brokers like Mr. Wood and the remanufacturers they supply
are pinching the printer giants, which rely heavily on profits from repeat sales of new
cartridges. The printer companies also are beginning to feel a squeeze from office-supply
outlets that sell do-it-yourself refill kits and chains such as Cartridge World and Island
Ink-Jet, which are setting up across the nation as cartridge-refilling stations for
consumers. In the past five years, the share of the global ink-jet-cartridge market held by
remanufactured cartridges has risen to 17% from 14%, says imaging-industry tracker
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 10 of 18
Lyra Research. Lyra expects that to rise to 24% by 2008, even though Consumer Reports
and other consumer watchdogs consider remanufactured cartridges inferior in quality.
H-P and others have responded by suing some remanufacturers for patent infringement or
other alleged offenses. They also encourage consumers to return used cartridges for
recycling by packaging post-paid return envelopes with new cartridges. John Solomon, a
vice president in H-P's imaging division, says the company is trying to help the
environment, not thwart remanufacturers. "We welcome competition," he says. Mr.
Solomon calls the cartridge collectors "a cottage industry" and says that while H-P's own
cartridges are more expensive, they are of better quality. Remanufactured cartridges,
which typically are identified as recycled or compatible replacements for name brands,
can be purchased online and are sold by office-supply chains. On H-P's Web site, a new
black cartridge for the H-P p1000 Photosmart printer sells for $29.99, while a recycled
cartridge for the same printer sells for $21.73 on the Web site of remanufacturer Rhinotek
Computer Products Inc. H-P recently sued Rhinotek, alleging the remanufacturer's
packaging misleads consumers into thinking its cartridges are new. Rhinotek has said the
lawsuit amounts to "bullying," and that it intends to fight it.
17. David Wood makes a good living by asking people for their ________.
a. empty printer paper boxes
b. garbage
c. used copy paper
d. empty printer cartridges Correct
Questions 18 – 22 from Money & Investing, Section C
Old Mother Hubbard
May 2, 2005; Page C1
By JUSTIN LAHART
http://online.wsj.com/article/0,,SB111499418779121756,00.html
Over time, operations at companies have become incredibly lean. But at the moment they
might not be lean enough. Just-in-time manufacturing and the advent of new technologies
allow companies to determine exactly how much inventory of parts, materials and
finished products they have on hand and how to track it down quickly. As a result, the
amount of inventory, relative to monthly sales, has declined steadily. In recent years, this
trend toward lighter inventories has accelerated -- an odd occurrence because, in the past,
when the economy recovered, inventory positions rose as companies fretted less that they
risked being saddled with unsold goods. "Even relative to the long trend of lower
inventories, inventories are low," says Lehman Brothers economist John Shin. "And yet
companies may still be holding higher inventories than they want to." The latest sign of
this came in the report on gross domestic product Thursday. The economy grew at an
annual rate of 3.1%, below economists' average estimate of 3.5%. What made the report
worrisome, however, was that so much of the growth -- 1.2 percentage-points worth -came from rising inventories.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 11 of 18
This inventory buildup was the latest indication that the economy cooled late in the first
quarter. Now, because they were left holding more wares than they'd like at the end of the
first quarter, companies could be making less, buying less and hiring less in the second
quarter. Today's report on manufacturing from the Institute for Supply Management
could be helpful in determining whether companies are throttling down production.
18. An inventory buildup is the latest indication that the economy ____ late in the
first quarter.
a. cooled Correct
b. heated up
c. expanded
d. stopped
Islamic Banking Grows, With All Sorts of Rules
By HUGH POPE
May 3, 2005; Page C1
http://online.wsj.com/article/0,,SB111508280589322878,00.html
JIDDA, Saudi Arabia -- Mishari al-Mishari worked for two decades at international
banking titan Citibank before he became chief executive of Bank Aljazira. He hired
Western-trained expatriates to fill management ranks at Aljazira, which has been posting
significant gains. But the key to Bank Aljazira's recent success is a plaque displayed near
the elevators at its headquarters in this Red Sea port city. It is a brass copy of a certificate
signed by a board of Muslim scholars, testifying that the institution now works in strict
compliance with Islamic religious laws. With his profits soaring in the Arab world's
biggest economy, Mr. Mishari spotted an early trend that is reshaping the financial
landscape of the Middle East and beyond: Islamic banking. Islam's Sharia law severely
limits the practice of charging or paying interest. But a new generation of Islamic banks
have found ways to make products mimic the Western originals, from floating-rate
infrastructure loans to Islam-compliant credit cards issued by Visa. The paperwork,
however, is Islamic. "Risk," Mr. Mishari says with a smile, "has no religion."
In the past decade, Islamic banking has matured from a tiny, sometimes controversial
backwater into an important current of global finance, especially as Western bankers and
borrowers compete for the new funds gushing into the Persian Gulf because of higher oil
revenue. A Citigroup Inc. unit now operates what is effectively the world's largest Islamic
bank in terms of transactions. Some $6 billion of Citibank deals now have been
structured and marketed in conformance with Islamic laws since starting out in 1996.
HSBC Holdings PLC, Deutsche Bank AG, ABN Amro Holding NV, Société Générale
SA, BNP Paribas and Standard Chartered also have established Islamic banking units in
the past few years. In 1999, there were just a dozen Islamic-branded investment funds;
now there are at least 150 around the world. In pioneering Malaysia, Islamic financial
instruments now account for 10% of the country's public and private financial dealings,
up from 6% in 2000, according to the Malaysian central bank. In Turkey, the biggest
economy in the Muslim world, market leader HSBC Turkey arranged $438 million of
loans for companies last year, up from $50 million in 2001.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 12 of 18
19. The key to Bank Aljazira's recent success is a plaque displayed near the
elevators at its headquarters testifying that the institution now works in strict
compliance with _______________.
a. international laws
b. Islamic religious laws Correct
c. United Nations laws
d. Unites States of America laws
Next Text Take This Job and ... File It
By DIYA GULLAPALLI
May 4, 2005; Page C1
http://online.wsj.com/article/0,,SB111517138376224101,00.html
Fresh out of Georgetown University in 2001, accountant Monica DiCenso was assigned
by PricewaterhouseCoopers LLP to advertising firm Interpublic Group of Cos., which
was about to restate five years of financial results. For weeks at a stretch, she worked
seven days a week, often eating sushi at her cubicle as she headed into evenings of more
number-crunching. Promoted quickly, she soon supervised three other young auditors.
Late last year, Ms. DiCenso quit the accounting firm, frustrated that her annual bonus in
effect rewarded her overtime at a rate of less than half the minimum wage. She now is a
Wall Street securities researcher. She became a statistic that the Big Four accounting
firms aren't happy about: another of the experienced young accountants who have fled the
profession even as they may never be more needed. The workload of the big accounting
firms has jumped in the past several years, as companies ramp up the scope of audit work
to better ensure that accounting scandal stays far from their doorsteps. The Big Four
accounting firms also face extra work created by the 2002 Sarbanes-Oxley securitiesoverhaul act, passed in the wake of the blowups at Enron Corp. and WorldCom (now
MCI Inc.). At the same time, the pressure to get the job done right also comes from
within: Faced with mounting litigation from the accounting debacles of earlier this
decade, the Big Four can't afford many more mistakes. Junior auditors, with three to five
years' experience, long have done much of the grunt work in auditing publicly traded
companies. They have always had the highest turnover at accounting firms -- as many as
one in four quits annually at PricewaterhouseCoopers, according to a recent study it
commissioned. Overall, nearly one in five accountants at large CPA firms left in 2003, up
from 17% in 2002, according to the American Institute of Certified Public Accountants.
The AICPA expects that trend to continue this year. To combat the problem, the Big Four
are trying to move from a culture of overloading and underpaying youngsters to nurturing
and better rewarding them.
20. To combat the problem of turnover the Big Four accounting firms are trying
to move from a culture of overloading and underpaying youngsters to nurturing
and __________ them.
a. better training
b. screening
c. better rewarding Correct
d. coaching
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 13 of 18
Maybe the Rich Really Are Like Us -- in Debt
By ROBERT FRANK
May 5, 2005; Page C1
http://online.wsj.com/article/0,,SB111525812602125418,00.html
Adding to the nation's personal-debt load, wealthy people have been borrowing
increasingly against their homes, stocks, and businesses to fund purchases and
investments. Private bankers and wealth managers say that borrowing among the richest
Americans has grown in the past few years as interest rates have remained historically
low. And this increase in debt comes from already lofty levels. The richest 1% of
American households -- or those with more than $5.9 million in net worth -- had $346
billion in debt in 2001, up $50 billion from 1998, according to the most recent data
compiled by Arthur Kennickell, a senior economist with the Federal Reserve.
While many of the ultrarich use debt to amplify investment strategies or for other
financial planning, high-end loans carry risks. With interest rates rising and markets
becoming more risky, many say the wealthy could be caught in a short-term cash-crunch.
Some say the borrowing wave resembles the heavy margin-lending of chief executives
and high-tech entrepreneurs in the late 1990s to buy stock and trinkets such as vacation
homes or yachts. When tech stocks crashed, many of the investors were forced to default.
A survey of people worth more than $5 million, conducted by Chicago-based Spectrem
Group, found that 19% had a second mortgage or home-equity loan. Fully 11% had
margin loans, 14% had credit-card balances and 11% had other loans. Private bankers say
high-end lending, while easing slightly as interest rates have risen, remains a robust
business. The loans suggest that debt addiction cuts across all classes. Unlike debt-laden
consumers, who have been using debt to pay bills and buy cars, homes and other items,
the rich have been using debt as a financial tool to make more on their investments.
Private bankers call it "strategic debt." Some are also using debt to finance lifestyle
purchases, like second or third vacation homes, private jets, racehorses, art and yachts.
Buying big-ticket items with debt can free up cash that then can be used in higher-return
investments. Others have used debt to diversify their holdings out of a single stock or
make other investments. They can borrow at 2% or 3%, for instance, and put the cash in
investments that can return 10% to 12%. The strategy has paid off in recent years, as
stock markets have generally outpaced interest rates. But with stock markets turning
lower this year, big borrowers are feeling a pinch.
21. Wealthy people have been ____________ to fund purchases and investments.
a. working overtime
b. borrowing Correct
c. selling cars
d. networking
It Pays to Run a Mutual Fund
By IAN MCDONALD
May 6, 2005; Page C1
http://online.wsj.com/article/0,,SB111534555605626576,00.html
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 14 of 18
As the financial markets have gone, so have mutual-fund managers' fortunes. Literally.
The healthy paychecks of the folks who run mutual funds have recovered along with
stocks and bonds in recent years. In fact, at least by one measure, portfolio managers at
mutual funds are pulling down more than their counterparts at hedge funds, the private
investment pools aimed at wealthy individuals and institutions. Those are among the
findings of a survey of investment-industry compensation set to be released today by
New York executive-search firm Russell Reynolds Associates and the CFA Institute, an
organization of money managers and investment analysts. The study comes amid
growing interest in mutual-fund-manager pay, with new rules requiring fuller disclosure
and several firms rethinking the financial incentives they give money managers.
While stocks and bonds have been floundering this year, their solid gains in the past two
years made a big difference for mutual-fund managers. Their median pay, including
salary and bonus, is $390,000, up 34% from $291,252 two years ago, according to the
study. In the two years ended March 31, the Dow Jones Industrial Average was up more
than 30%, and mutual-fund assets rose 28% to more than $8 trillion, according to the
Investment Company Institute, a fund-industry trade group. "Compensation is up pretty
smartly across the board," says Debra J. Brown, the study's author and a managing
director at Russell Reynolds Associates focusing on investment managers and analysts.
Fund managers' bonuses continue to be driven as much or more by the profits that their
company earns and growth in assets under management as by the performance of their
fund, for instance. And men continue to earn more than women overall, as they have in
past surveys. The survey collected information via email in February and March from
CFA Institute members, including more than 10,600 responses in the U.S. Respondents
provided 2005 base salary, combined with bonuses, including noncash compensation
such as stock options, that they received this year for performance in 2004. The median
U.S. stock-fund managers' pay is $460,000, up 48% from two years ago, but down from
the $481,500 peak in 2001, when checks were inflated by bull-market bonuses, the study
found. Meantime, the median U.S. bond-fund managers' pay is $340,000, a new high and
up 30% from two years ago. Managers running foreign bond funds had the biggest jump
in compensation, with median pay of $460,000, up 92% from two years ago. The increase
likely reflects the solid returns posted by -- and rising assets in -- emerging-market and
other foreign bond funds in the past two years. The study focuses on median pay -- or the
salary in the middle of the group when ranked from highest to lowest -- rather than the
average or mean pay, to limit the distortions of very high or very low compensation.
Many fund managers, of course, earn far more or far less than these figures. During the
fund-trading scandal in 2003, for instance, the Securities and Exchange Commission
disclosed that two portfolio managers at Putnam Investments earned a combined $23
million in 2000. Mutual funds have increasingly fretted that hedge funds would poach
their talent. Hedge-fund managers typically take a healthy cut from fund profits, making
outsize payouts possible in good years. But the survey suggests that hedge funds'
reputation as a gravy train might be less deserved now that their ranks have swelled in
recent years. Median pay for investment pros at hedge funds, including fund managers,
analysts and traders, was $250,000 in 2005, slightly higher than $240,000 for mutual
funds. But the $390,000 median salary of a mutual-fund manager is higher than the
$330,000 for a hedge-fund manager.
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 15 of 18
22. The paychecks of the folks who run mutual funds have _____ in the most
recent years.
a. decreased
b. increased Correct
c. disappeared
d. been cut in half
Questions 23 – 25 from Personal Journal, Section D
Survival Odds Improve in Car-SUV Crashes
By KAREN LUNDEGAARD
May 3, 2005; Page D1
http://online.wsj.com/article/0,,SB111508156948422837,00.html
Cars are doing a better job of protecting occupants in crashes with sport-utility vehicles
and pickup trucks, even as light trucks have gotten bigger and heavier, according to a
new study by the Insurance Institute for Highway Safety. In cars that collided with
midweight SUVs, the death rate fell 39% -- to 42 deaths per million registered SUVs in
2000 to 2003, compared with 69 deaths per million registered SUVs a decade earlier. The
death rate fell even more in collisions involving heavier SUVs -- to 49 deaths per million
registered SUVs from 86 a decade earlier. The Institute, the Arlington, Va.-based
research arm of auto insurers, specifically looked at the differences in height and weight
of vehicles and how that mismatch affects death rates in crashes. It found that while
incompatibility is still an issue, it's less of a problem than it was a decade ago.
Incompatibility -- the idea that people in cars are more at risk in collisions with SUVs and
trucks because those vehicles are bigger -- has been a focus of recent efforts to make
vehicles safer. That includes the million-plus dollars the Institute has put into a crash-test
program that mimics an SUV slamming into the sides of other vehicles. It is also one of
the federal government's top auto-safety priorities. Auto makers have also agreed to make
voluntary changes to vehicles to address the mismatch issue. Results of those
commitments -- which include adding head-protecting air bags and aligning vehicle
frames by the end of the decade -- wouldn't show up yet in accident statistics, though.
Instead, the Institute points to more basic safety measures to explain the improvement
over the past decade: better vehicle designs, improved seat-belt use, and half of all
registered cars now equipped with driver air bags, compared with 3% in 1990. SUVs
have also changed during that time period, going from heavier, more aggressive truck
underbodies to SUVs built on car frames that inflict less harm in a crash.
23. Cars are ____________ protecting occupants in crashes with sport-utility
vehicles and pickup trucks.
a. doing a worse job of
b. doing a much worse job of
c. doing a better job of Correct
d. not at all
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 16 of 18
Funeral Industry Is Hit With Casket-Pricing Suit
By JOHN R. WILKE
May 4, 2005; Page D1
http://online.wsj.com/article/0,,SB111516202679123838,00.html
Consumer advocates filed suit against three of the biggest funeral-home chains and the
leading U.S. casket maker, alleging they conspired to keep prices high and shut out
casket discounters such as Costco and the online retailers that have sprung up in recent
years. The lawsuit, filed Monday in federal court in San Francisco, charges that the
companies engage in price-fixing and sell caskets for as much as six times their
wholesale cost. High funeral costs have long been a target of consumer complaints, but
the lawsuit represents a significant new challenge to the industry. The suit, filed on behalf
of a consumer group and six families who say they were overcharged for caskets, seeks to
be certified as a class-action, representing millions of casket buyers. If the court grants
class-action status, the companies could face huge potential damages for overcharges
going back to 2001, under current antitrust law. Casket sales in the U.S. totaled about $3
billion last year. Funeral costs have been rising in recent years, and now average about
$6,000, despite pressure from the growing popularity of less-expensive cremation,
industry analysts say. In response to rising prices -- and to federal rules meant to
encourage competition -- there are a growing number of discounters such as Internetbased funeraldepot.com, as well as Costco Warehouse Corp., which sells caskets for as
little as $950. At funeral homes, coffins typically cost at least twice that, and are the
largest single component of funeral costs.
24. Consumer advocates filed suit against three of the biggest funeral-home
chains and the leading U.S. casket maker, alleging they engage in _________.
a. false advertising
b. price-fixing Correct
c. poor quality management
d. unfair discounting
Beyond Stainless: The New Kitchen Appliances
By CHERYL LU-LIEN TAN
May 5, 2005; Page D1
http://online.wsj.com/article/0,,SB111524762218125133,00.html
A big question is weighing on the kitchen-appliance industry these days: Is there life
beyond stainless steel? Thanks to the building and remodeling boom, stainless steel
appliances have become ubiquitous in both high- and low-end kitchens. As a result,
makers of upscale stoves, refrigerators and cooktops are looking for their next act.
Concern over stainless-steel fatigue -- combined with the desire to sell even more
appliances to people who recently upgraded their core kitchen components -- is leading
manufacturers to do some experimenting. They are trying post-stainless looks ("oiled
bronze" toasters anyone?) and rolling out the next wave of add-on appliances for people
who want restaurant-style kitchens at home. One example: BSH Home Appliances
Corp.'s Gaggenau brand's new teppanyaki griddle ($1,999), which lets homeowners
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 17 of 18
attempt to replicate the knife-twirling and sirloin-tossing at hibachi-style Japanese
restaurants. These are among the products that will be featured at the Kitchen/Bath
Industry Show in Las Vegas next week. That is where appliance companies make their
big introductions for the year, and buyers for big retailers decide what to stock.
The event, which kicks off Tuesday, is taking on greater importance this year because
U.S. shipments of major appliances are expected to post the smallest percentage increase
since 2001, according to the Association of Home Appliance Manufacturers.
25. Thanks to the building and remodeling boom, __________ appliances have
become ubiquitous in both high- and low-end kitchens. As a result, makers of
upscale stoves, refrigerators and cooktops are looking for their next act.
a. iron
b. restaurant
c. stainless steel Correct
d. copper
© Copyright 2005 Dow Jones & Company, Inc. All rights reserved.
WSJ Professor Guide: Page 18 of 18