The Wall Street Journal Weekly Quiz

The Wall Street Journal Education Program Weekly Review & Quiz Covering front-page articles from April 29-May 5, 2006 Professor Guide with Summaries Spring 2006 Issue #16 Developed by: Scott R. Homan Ph.D., Purdue University

Questions 1 – 12 from The First Section, Section A

'Wake-Up Call' Gas-Price Uproar Is Likely To Shift U.S. Energy Policy By JOHN J. FIALKA, LAURA MECKLER, STEVE LEVINE April 29, 2006; Page A1 http://online.wsj.com/article/SB114627176825239491.html

The surging price of oil and gasoline has sparked a wave of jockeying in Washington that could presage the biggest change in federal energy policy since the 1970s. Suddenly, ideas that have languished on various wish lists for years have a realistic chance of becoming policy, as motorists in many parts of the country face $3-a-gallon gasoline even before the summer driving season starts. Among those getting serious consideration for cutting gasoline costs and reducing foreign-oil dependence: higher fuel- economy standards for cars, new incentives to shift cars away from gasoline, a crackdown on energy-price manipulation and inducements to encourage more refining. All aim to appease voters, who will go to the polls to elect members of Congress in just six months. But none would produce immediate relief. Short of price controls, which the Bush administration flatly rejects, policy makers can do little to affect energy costs in a matter of days or even weeks. Prices are driven largely by factors beyond their control -- as underscored Friday, when crude-oil futures rose nearly $1 a barrel on escalating nuclear tensions with Iran, settling at $71.88 on the New York Mercantile Exchange. President Bush said Friday that the U.S. has had a "wake-up call" about energy in recent weeks, and in Washington doing nothing isn't a palatable option. Here's a look at what could be coming, from new regulations on cars that run on gasoline to farm-waste- derived fuels: Higher Fuel-Economy Standards Federal rules require auto makers' fleets to average 27.5 miles a gallon, a fuel-economy standard that hasn't gone up since 1990. Higher standards would force auto makers to make more fuel-efficient vehicles. But every proposal to raise the bar since has been blocked by car manufacturers, for whom efficient cars are more expensive and have been less in demand, and free-market Republicans who oppose government mandates. But the political ground shifted this past week when both President Bush and Senate Republican leaders said they'd be willing to act, and quickly. House Republicans also plan hearings. The outcome, however, may not necessarily lead to significantly higher mileage standards. The Bush administration doesn't favor increasing fuel-economy targets unless it can overhaul how the Carter-era program works as well.

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 1 of 36 A guide to how it might do that can be seen in recent new rules for sport-utility vehicles, minivans and pickup trucks. In revamping mileage standards for those vehicles, the administration increased mileage targets modestly. But they also changed the system in a way that helped manufacturers generally, and aided struggling General Motors Co. and Ford Motor Corp. in particular. Previously, a company's fleet had to meet an overall corporate average. That forced GM and Ford, which make a lot of big trucks that get low mileage, to balance their fleets with less- popular but more fuel-efficient smaller vehicles. Now, instead of taking the whole fleet into account, there's a sliding scale on each individual vehicle. Big SUVs, for example, have more lenient standards than small SUVs. The bottom line: a modest increase in fleet-wide economy -- but also an effective reduction in the cost of producing big guzzlers, now measured on their own terms rather than in relation to the whole fleet. The administration would consider a similar reform for passenger cars, said Jackie Glassman, administrator of the National Highway Traffic Safety Administration, which oversees the program. That has U.S. auto makers reacting with cautious optimism. DaimlerChrysler AG issued a statement Friday saying it "could support reasonable and achievable increases in fuel economy." Environmental groups are more skeptical. "I would love to believe the president has come to realization he must increase... standards," said Dan Becker of the Sierra Club. "Given this administration's track record, I suspect it is more evasion than epiphany." Backed by Senate Republicans and the White House, the fast-growing ethanol industry is charging beyond traditional corn-based ethanol into a relatively new area of research that could vastly extend supplies of nongasoline motor fuel: cellulosic ethanol, a fuel made by extracting sugar from cheap and plentiful farm wastes, such as corn stalks, wood chips and wheat and rice straw. Until now, growth has been hung up by high costs. When President Bush first highlighted the fuel in February, it cost the Energy Department $2.30 a gallon to make ethanol from corn wastes. At the time gasoline was retailing at $2.35.

1. Federal rules require auto makers' fleets to average______miles a gallon, a fuel- economy standard that hasn't gone up since 1990. a. 25.5 b. 26.5 c. 27.5 Correct d. 28.5

2. A fuel made by extracting sugar from cheap and plentiful farm wastes, such as corn stalks, wood chips and wheat and rice straw is known as a. sprinter ethanol b. cellulosic ethanol Correct c. cellulitic ethanol d. hybrid ethanol

As Gasoline Prices Soar, Americans Resist Major Cuts in Consumption

With gasoline prices in the U.S. approaching an average $3 a gallon, Americans are moaning about the rising cost, but so far they are resisting big changes in their gas- guzzling ways. A 25% jump in prices at the pump since December has set off a firestorm in Washington. Politicians are threatening auto makers with tougher federal fuel-economy standards and oil companies with higher taxes on record profits, while warning against price gouging. Auto and oil executives are predicting that a long-term shift toward greater fuel efficiency is under way. But none of these influences is likely to have much effect on gasoline prices or oil consumption in the near term. Unlike the energy crises of the 1970s, which resulted from reduced supplies of Mideast oil, today's crunch is due largely to a swift rise in global oil demand. The surest way out of the problem, most experts agree, would be to curb consumption of vehicle fuel, particularly in the U.S. For years, economists have argued that the most effective way to moderate U.S. demand would be to hit Americans with significantly higher gasoline taxes. Today's high prices amount to a market test of that theory. The early results: High prices do have some effect, but prices would have to be higher than they are today -- and would have to stay high for a long time -- to meaningfully curb gasoline consumption by the nation's massive fleet of cars and trucks, which accounts for about 10% of global oil use. At the margins, there are some signs that high gasoline prices may be starting to alter consumer behavior. Traditionally, gasoline use in the U.S. rises about 1.5% each year. But in three of the six months from September -- immediately following the Gulf Coast hurricanes -- through February, gasoline consumption fell compared with a year earlier, according to data from the U.S. Energy Information Administration. In the three months in which it grew, it never rose by more than 0.4%. Yet in March, as gasoline prices soared, demand appeared to return to more-robust levels, growing by 1%, according to preliminary data. "There's definitely a noticeable decrease in the growth of demand," says Tancred Lidderdale, senior economist at the Energy Information Administration. "The problem is demand is still growing." Though the recent run-up in gasoline prices has been steep, it hasn't been debilitating for most Americans. The price of a gallon of regular gas averaged $2.74 in April, according to the Energy Information Administration. Adjusted for inflation, that was still 14% below the peak in March 1981, when, in today's dollars, gasoline averaged $3.18. Moreover, Americans are better-positioned to handle a run-up in fuel prices than they were a quarter-century ago. Gasoline now accounts for only 3% of total personal- consumption spending, down from 5% in 1981, according to the U.S. Bureau of Economic Analysis. That gives many consumers less reason to contemplate cutbacks when prices rise. In Plano, Texas, a suburb north of Dallas, Alfred Goh, a 42-year-old commercial-real- estate broker, yesterday paid $63.86, or $3.06 a gallon, to fill up his sport-utility vehicle, a white 2004 Lexus GX 470. The vehicle averages 16 miles per gallon, according to

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 3 of 36 federal figures, and Mr. Goh, who drives extensively for work, reckons he fills it up two or three times a week. Mr. Goh says he has no plans to change his driving habits or his vehicle. "I won't limit driving because of gas prices, because it's a necessity," he says. As for his vehicle, "I think this is a safe car," he says, and "it's safety first." His only concession to rising gasoline prices is that he now uses midgrade gasoline instead of premium, a move that saves him about 10 cents a gallon. Even Americans who want to slash their gasoline use will find it hard to do so in a society built on cheap energy, where far-flung suburbs and powerful cars are the rule. "If you've got to drive to work every day, you've got to drive to work every day," says John Felmy, chief economist of the American Petroleum Institute, the oil industry's Washington-based trade group. The limits of mass transit add to the difficulty of cutting fuel consumption. Though nationwide figures aren't yet available, many systems around the country are reporting significant increases in passengers, says William Millar, president of the American Public Transportation Association. In Washington, where his group is based, the Metrorail transit system reports that three of the 14 busiest days in its history occurred the third week in April. The problem: Public transit isn't available in much of the U.S. and doesn't match the commutes of many Americans in places where it exists. Research suggests it takes years for higher gas prices to meaningfully damp consumption. Opinions differ, but many experts say that, in the short term, the "price elasticity" of U.S. gasoline use is as low as 0.1. That means gas prices have to rise 10% to produce an initial 1% drop in demand. Charles Komanoff, a New York energy analyst, believes the short-term elasticity is stronger than that, though it's still modest. "There is an impact" of higher prices on demand, he says. What influences gasoline use more quickly than gasoline prices, experts say, is a change in personal income. Among the first things Americans do as their paychecks get bigger is to buy zippier cars and drive their existing cars more. Incomes have been rising in the U.S., as they have throughout most of the industrialized world. The result: "It takes a very big price increase to have a big impact today," says Philip Verleger, a Colorado-based oil economist. Mr. Verleger estimates that real, or inflation-adjusted, gasoline prices have to rise at roughly five times the rate of real income just to keep the nation's gasoline demand flat. Given that real income is rising at about 3% a year, real gasoline prices would have to surge 15% to prevent consumption from growing, according to his analysis. Broadly, the latest federal statistics appear to bear him out. In the first quarter, the real price of gasoline averaged about 17% more than a year earlier, and U.S. gasoline consumption was up just 0.3% -- fairly close to flat. Still, Mr. Verleger and federal energy officials caution that it's too early to discern any long-term trends from the data. If gasoline prices stayed high for several years, researchers say, they would tend to meaningfully curb consumption. Over time, people would factor the higher prices into decisions that have big effects on their gasoline use. They might choose more-efficient models when it comes time to replace cars, as happened in the early 1980s. They might decide to switch jobs or move to shorten their commutes.

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 4 of 36 Some major industries say they believe that a long-term change in U.S. gas consumption is in the works. At the top of the list is the auto industry. Sales of traditional sport-utility vehicles -- the ones built on the guts of pickup trucks, which tend to consume the most gasoline -- are falling fast. The decline began in 2003, when gasoline was cheap, but it has accelerated markedly since prices began rising in early 2005. Sales of truck-based SUVs, which fell 4% in 2003 and 3% in 2004, tumbled 13% in 2005 and 7% in the first quarter of this year. The traditional-SUV market is "collapsing," says George Pipas, Ford Motor Co.'s U.S. sales-analysis manager. When gas prices first began creeping higher, auto makers offered bigger sales incentives on SUVs, effectively giving buyers "a gas card in the glove box," Mr. Pipas says. But the continued rise in gasoline prices has largely inured buyers to such inducements. "If you think that by putting an extra $1,000 on an Expedition you can sell enough to make it worth your while, you're wrong," Mr. Pipas says, referring to one of Ford's large SUVs. "You're pushing on a string. At some point you say, 'Pull back. The market is what it is.' " Yet plenty of Americans still are buying fuel-thirsty rides. Despite the weakness of the SUV segment overall, U.S. sales of the recently redesigned Chevrolet Tahoe SUV soared 37% in the first quarter. And luxury cars not known for their fuel economy also remain hot sellers. In the first quarter in the U.S., BMW sales rose 11%, Mercedes sales increased 17%, and Porsche sales surged 26%. The oil industry also is betting that a change is under way. Exxon Mobil Corp. says it believes that, by 2030, hybrid gasoline-and-electric cars and light trucks will account for nearly 30% of new-vehicle sales in the U.S. and Canada. That surge is part of a broader shift toward fuel efficiency that Exxon thinks will cause fuel consumption by North American cars and light trucks to peak around 2020 -- and then start to fall. "For that reason, we wouldn't build a grassroots refinery" in the U.S., Rex Tillerson, Exxon's chairman and chief executive, said in a recent interview. Exxon has continued to expand the capacity of its existing refineries. But building a new refinery from scratch, Exxon believes, would be bad for long-term business.

3. Unlike the energy crises of the 1970s, which resulted from reduced supplies of Mideast oil, today's crunch is due largely to: a. the war in Iraq b. a swift rise in global oil demand Correct c. the loss of U.S. oil refineries in Hurricane Katrina d. the increase in personal income

4. Traditionally, gasoline use in the U.S. rises about ____ each year. a. 1.5% Correct b. 2.0% c. 2.5% d. 3.0%

Crossroads Trade and Immigration Battles Of the Past Offer Lesson for U.S.

Surging immigration unsettles workers and prompts calls to stop the flow. Congress ponders higher tariffs to protect struggling industries. National-security fears heighten anxiety about foreigners. A growing gap between the rich and the middle class fuels angst about globalization. It sounds like today, but it could also be the 1920s. After a backlash against immigration and a "Red Scare," the U.S. sharply limited the inflow of immigrants for years. The Smoot-Hawley Tariff, conceived to protect farmers, then helped trigger a trade war that deepened the Great Depression. It could also describe the 1980s. With factory layoffs blamed on imports and public cries to limit illegal immigration, Ronald Reagan struck compromises. His administration persuaded Japan to agree to "voluntary" export restraints, coordinated a drop in the value of the dollar and toughened immigration enforcement while granting amnesty to some. The U.S. kept its doors open to goods, capital and people -- and its economy prospered. As America faces similar pressures today, what are the lessons? Buffeted by similar political and economic tensions, these two periods had different outcomes, largely due to how political leaders responded. These days, leaders know better the dangers of closed borders than their 1920s predecessors, and a return to that degree of isolationism seems unlikely. But they also lack the political assets of their 1980s counterparts, and that could make it hard to resist calls to restrict or even reverse America's traditional openness to foreign goods, services and people. "The potential for an explosion in protectionist sentiment is greater now than it was" in the 1980s, says William Brock, who was Reagan's U.S. Trade Representative after representing Tennessee in Congress for 15 years. "This is the least constructive atmosphere in my 40 or 50 years in and out of government. People want to find someone to blame for almost everything." Romano Mazzoli, a former Democratic congressman from Louisville, Ky., who co- sponsored immigration legislation in the 1980s, worries that a failure to deal with illegal immigration could hurt the legal kind. "I like to think we've come so far since the 1920s that we could never repeat" that era's racially motivated immigrant quotas, says Mr. Mazzoli, whose father emigrated from Italy in 1914. But, he adds, "The guy whose job is on the line...may not have an economics degree from Harvard. What he does have is the vote. And people like him can make troublesome noises on Election Day." American ambivalence about trade and immigration is nothing new even when the economy is doing well. While globalization -- the increased movement of goods, capital and people across borders -- may benefit society as a whole, it tends to harm specific groups. Cheap imports, for instance, are good for consumers but threaten U.S. companies making rival products. And those harmed, whether farmers in the 1920s, auto workers in the 1980s or small manufacturers today, can be vocal. The 1920s backlash followed decades of heavy immigration from Eastern and Southern Europe, which labor leaders and others believed threatened the wages of native-born Americans. The 1980s backlash came after the emergence of large, intractable trade

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 6 of 36 deficits, in particular with Japan, which were blamed for turning the industrial Midwest into the Rust Belt. Today, immigration rates are back to levels not seen consistently since the early 1920s, fueling an increasingly divisive debate highlighted by demonstrations across the U.S. yesterday campaigning against the possibility of new restrictions on immigration. At the same time, imports now command their largest share of U.S. gross domestic product in two centuries, according to Douglas Irwin, an economist specializing in trade history at Dartmouth College. Cross-border merger deals are sparking fears that overseas companies, some state-owned, could control vital U.S. assets. President George W. Bush has shown both protectionist and pro-globalization streaks. He raised steel tariffs and tightened restrictions on Chinese textile imports. But he also opposes broader tariffs on China, unsuccessfully defended a proposed acquisition of some U.S. port operations by a Dubai-based company and is lobbying for a guest-worker program, the details of which he has left vague. Yet his lack of popularity, political capital and bipartisan support makes it harder to prevail in Congress, or even with his own party. Senate Finance Chairman Charles Grassley, an Iowa Republican, supported the 1986 immigration reform but opposes Mr. Bush's guest-worker program. In 1986, "I was told amnesty along with employer sanctions would solve our problems, and...it just led to an 11-million-person problem," he says in an interview. "I've been burned once and am not going to be burned twice."

5. The ______, conceived to protect farmers, then helped trigger a trade war that deepened the Great Depression. a. Farm Aid Tariff b. Smoot-Hawley Tariff Correct c. Smith-Jones Tariff d. Davidson-Hawley Tariff

6. Today, immigration rates are back to levels not seen consistently since the early _____. a. 1620s b. 1880s c. 1920s Correct d. 1940s

People's Choice Germany's Merkel Gains Favor By Backing Away From Pledges By MARCUS WALKER May 3, 2006; Page A1 http://online.wsj.com/article/SB114661999513342225.html

BERLIN -- Six months ago, Angela Merkel failed to win the German election outright and wondered aloud whether she'd have to resign as Germany's conservative leader. She managed to survive and grab the country's top job only through an awkward coalition with her bitter political opponents.

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 7 of 36 Now she's one of the most popular leaders of any Western country. The secret of her success: She has all but abandoned the economic overhaul that she campaigned to bring to the world's third-biggest economy. The story of Ms. Merkel, who is meeting with President Bush in Washington this evening, reflects Europe's economic quagmire. Challenged by low-cost labor abroad, Western Europe desperately needs to become more competitive to escape from a trap of low economic growth and high unemployment. Most business leaders and economists agree that strong moves are needed to overhaul inflexible labor codes and trim the costly social safety net. What's missing are strong leaders to carry them out. In France, President Jacques Chirac and his prime minister have been crippled by a series of policy fiascoes -- most recently, riots that forced them to back off a change in labor laws. In the United Kingdom, Prime Minister Tony Blair, who has said this is his last term in office, is too weak to push through overhauls of education and health care. In Italy, Romano Prodi's left-of-center coalition was elected so narrowly last month that he is unlikely to be able to enact his plans to rein in public spending, cut payroll taxes and inject more free-market competition into the economy. Ms. Merkel once was touted as a leader who would bring to Germany the kind of free- market overhaul that Margaret Thatcher introduced to Britain in the 1980s. In recent years Ms. Merkel had advocated deregulating the German labor market and partly relieving businesses of the burden of paying for the welfare state. Since her election, Ms. Merkel's political star has risen at the expense of her economic aims. She sacrificed her pro-market strategy to make peace with an opposition party leader who famously called some foreign investors "locusts." She rarely makes a statement on public finances without first sending Germany's finance minister, who is from her rival party, a text message from her mobile phone. She presides over the same high unemployment rate of over 11% that drove out her predecessor. A year ago, Ms. Merkel promised a different scenario at a dinner for CEOs hosted by the American Chamber of Commerce in Germany. She predicted an intense 15 months following her presumed election victory in which she would cut back union powers, deregulate the labor market and slash business taxes to help the economy, according to Fred Irwin, president of AmCham Germany, who was present. She predicted that people would take to the streets to protest, Mr. Irwin recalls. Instead, recent polls put Ms. Merkel's public approval ratings at around 70%, roughly double those of President Bush. There are other important factors in her comeback. Hemmed in on economic policy, Ms. Merkel, a former physicist from East Germany who turned to politics when the Berlin Wall fell, has been unexpectedly active in foreign relations. She has shifted the diplomatic landscape, repairing relations with Washington that were damaged by disagreements over Iraq, and loosening Germany's tight ties with France and Russia. She has emerged as the European Union's power broker, winning foreign respect that makes her popular also among Germans, who are eager to be liked abroad partly because of their dark modern history. At the same time, a rise in business confidence, the German stock market and growth projections -- though still low by historical standards -- have buoyed the country's morale. Ms. Merkel declined requests for an interview. Some people close to the chancellor say she hasn't given up on the economic changes she knows Germany needs. Her game plan,

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 8 of 36 they say, is to build up her political authority so that she can win the next election in 2009 with a stronger mandate for change. But many of her free-market allies worry that her pragmatism will keep her from ever being able to translate her popularity into the painful action needed for Germany to become Europe's growth engine once more. "Angela Merkel is chancellor and wants to stay it: That is her main belief," says Otto Graf Lambsdorff, a former cabinet minister and a veteran of Germany's pro-market Free Democratic Party. Once a fan of her commitment to change, he now says he doubts she has any.

7. Ms. Angela Merkel is the leader of ______. a. France b. United Kingdom c. Italy d. Germany Correct

8. Recent polls put Ms. Angela Merkel's public approval ratings at around _____. a. 17% b. 26% c. 70% Correct d. 83%

Ivory Power Once Collegial, Research Schools Now Mean Business By BERNARD WYSOCKI JR. May 4, 2006; Page A1 http://online.wsj.com/article/SB114670909113943444.html

TEMPE, Ariz. -- For most of his 41 years at Arizona State University, George Robert Pettit enjoyed the near autonomy of a prominent academic scientist. Dr. Pettit founded the university's Cancer Research Institute in 1975 and ran it for 30 years, largely funded with royalty income on his 62 U.S. patents and money he raised from gifts and grants. A professor of chemistry, he specialized in the synthesis of naturally occurring substances that might be the basis of anticancer drugs. Today, Dr. Pettit's empire is no more. In an unusually bitter campus war, Arizona State's new administration abruptly dismantled most of the cancer center on Jan. 27, eliminating the jobs of 30 of about 40 scientists and other personnel. Dr. Pettit, 76 years old, remains a tenured professor but with almost no funding or authority. "I can't even spend a dime for a test tube," says Dr. Pettit, who has sued the Arizona Board of Regents and top university officials in U.S. District Court in Phoenix, seeking reinstatement and unspecified damages. University officials have denied all charges and are fighting the suit. Dr. Pettit's battle with his employer spotlights a broader change under way in academia, as many universities start to treat their professors more like employees of a business. Once, academic researchers had broad latitude to pursue the subjects that interested them, with light oversight and scant pressure to produce things with direct application in the marketplace.

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 9 of 36 Now, universities are increasingly demanding accountability, and refusing to coddle scholars who don't pull their weight in the competition to secure grant money. As Dr. Pettit's research field fell out of favor, he failed to get a renewal of a five-year grant from the National Institutes of Health, a vital source of his funding -- and later his bosses blocked his efforts to refile the proposal.

9. Dr. Pettit founded the Arizona State University's Cancer Research Institute in 1975 and ran it for 30 years, largely funded with royalty income on his _____U.S. patents and money he raised from gifts and grants. a. 12 b. 22 c. 42 d. 62 Correct

10. Dr. Pettit's battle with his employer spotlights a broader change under way in academia, as many universities start to treat their professors more like ______. a. employees of a business Correct b. temps c. consultants d. students

Why Microsoft Battles Europe Years After Settling With U.S. By MARY JACOBY May 5, 2006; Page A1 http://online.wsj.com/article/SB114679425235844561.html A year ago, Microsoft Corp. Chief Executive Steve Ballmer arrived in Brussels for secret peace talks with Europe's antitrust enforcer Neelie Kroes, a rare sign of hope in the software maker's long battle with her office. At Microsoft's request, the meeting wasn't to be announced, both sides confirm. European Union officials took that to mean the talks would be substantive and not merely a photo op. So they were dismayed to read a combative interview with Mr. Ballmer in a French newspaper announcing he was on his way to Brussels. The article quoted him saying the regulators "don't like Microsoft's power" and that he was "frustrated" by their talks. A Microsoft spokesman, Tom Brookes, said the newspaper leak about the trip had been inadvertent. But such misunderstandings and lack of trust on both sides help explain why, nearly five years after the software giant reached a settlement with the U.S. Justice Department in a similar antitrust dispute, it is still battling with Europe. The fight pits powerful and increasingly angry regulators against a monopolist company known for its aggressive business tactics. Last week, Microsoft faced off with European regulators and lawyers from a group of its biggest rivals in a glass-walled courthouse in Luxembourg. The court is considering the company's appeal of a 2004 European finding that it unfairly uses its Windows operating system, found in 90% of personal computers, to elbow rivals out of other software markets. A ruling is expected within a year. Until then, the company must comply with EU orders to change critical business practices. At last year's meeting in Ms. Kroes's Brussels office, both sides promised to

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 10 of 36 stop squabbling and find compromises. But it didn't take long for the goodwill to evaporate. Engineers from rival software companies, under tight security at Microsoft headquarters in Redmond, Wash., looked over a technical manual Microsoft had been ordered to craft. They were dismayed by its length and disorganization. The EU ordered Microsoft to rewrite the manual, prompting a second meeting between Ms. Kroes and Mr. Ballmer. The two sides later quarreled over Microsoft's demand that an EU expert fly to Redmond to view the updated manual. Ms. Kroes says she has been angered by a Microsoft campaign to portray her as colluding with U.S. rivals to damage the company. "Those who are saying I'm unfair, they don't know me," she says in a rare interview. Microsoft general counsel for Europe, Horacio Gutierrez, counters that regulators keep "moving the goal posts" on what the company must do to satisfy them. "We've consistently done everything in our power to meet the commission's demands and we will continue to comply with any clear directions we receive," Mr. Gutierrez says. As the acrimony has intensified, the stakes have also risen. Ms. Kroes recently warned Microsoft she will monitor its next version of Windows, dubbed Vista, for antitrust infractions. The U.S. government has taken the unusual step of warning Ms. Kroes not to treat the software titan unfairly -- even though other big U.S. tech companies are urging her to act. At heart, the battle is over the same issue as the U.S. antitrust fight: promoting competition in global software markets that Microsoft dominates. Because it produces both Windows, the basic brains of most PCs, and other software that runs seamlessly with Windows, Microsoft has a huge advantage over other software companies, the EU and the rivals say. They want a level playing field. But Microsoft argues the EU wants it to hand competitors valuable intellectual property. The U.S. essentially stopped pursuing antitrust action against the company and settled its own hard-fought case nearly five years ago. So Microsoft's U.S.-based rivals have increasingly turned to the EU to aid their cause. Supporting Ms. Kroes is a high-powered group of competitors including International Business Machines Corp., Oracle Corp., Sun Microsystems Inc., Red Hat Inc., RealNetworks Inc. and Adobe Systems Inc. More recently, Web search giant Google Inc., has urged Ms. Kroes to keep Microsoft from using Windows Vista to direct millions of computer users to its own MSN Web-search site, possibly damaging Google's position in the lucrative market for Internet advertising. Sun's Complaint The EU investigation began in December 1998, prompted by a complaint from Sun. The Santa Clara, Calif., software maker claimed Microsoft was trying to cripple its business by concealing technical information Sun needed. As a result, Sun said, its office- networking software couldn't communicate easily with other Microsoft networking products or personal computers using Microsoft Windows -- the operating system used by the employees of most of its large corporate customers. Sun says that put it at a disadvantage against Microsoft's competing product. In 2001, the EU opened a separate investigation into whether Microsoft was illegally hurting makers of music and video-playing software, such as RealNetworks, by embedding Microsoft's own Windows Media Player software free of charge in its Windows programs.

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 11 of 36 In March 2004, the EU issued its antitrust ruling, which carried a $613 million fine and ordered Microsoft to do two things to help its rivals compete. First: Stop building a free copy of its media player into Windows, so other makers of media-playing software would have a better chance to compete. Second: Produce an instruction manual to help rivals write Windows-compatible software for knitting together complex office computer networks. That same year Ms. Kroes, now 64 years old, took over as the new head of the EU's antitrust office. Dubbed "Nickel Neelie" by Dutch media for her toughness, the former Dutch cabinet minister and business-school president nevertheless started off in the new job cautiously. In line with the new European Commission's free-market agenda, she approached merger applications with a light touch, letting deals like Procter & Gamble Co.'s $53 billion purchase of Gillette Co. sail through. Separately, Microsoft paid more than $3 billion to Sun, Massachusetts software maker Novell Inc. and RealNetworks to drop their related complaints in both Europe and the U.S. That removed the company's strongest adversaries from direct involvement in the EU case. But behind the scenes, the career regulators who had toiled for years on the Microsoft case were continuing to press for a hard line in making the software giant comply with their 2004 orders. They began to suspect Microsoft was dragging its feet. Microsoft denies the allegation. In early 2005, for example, regulators were startled when the company sent over boxes with thousands of pages of documents related to the programming-manual dispute. The EU's Microsoft case leader, a Spaniard named Cecilio Madero, phoned the Microsoft offices in Brussels to complain. "We can't possibly go through all this," Mr. Madero said. He calmed down when a Microsoft lawyer came over to help his team sort through the boxes for the relevant materials, both sides say. By March, a commission spokesman, Jonathan Todd, was publicly threatening Microsoft with up to $5 million a day in new fines until it produced what regulators considered a workable manual. "We have serious doubts that Microsoft is complying," Mr. Todd told reporters. "It doesn't seem to be working at all." To smooth the rising bad feelings, Mr. Ballmer last April quietly sought the meeting with Ms. Kroes. Despite the leak to the press, the meeting went well, both sides say. Ms. Kroes said she didn't want confrontation. "I'm just looking for practical results in the market," she told Mr. Ballmer, both sides confirm. Mr. Ballmer said he agreed, and they sketched out a rough road map for resolving their differences by the end of May 2005. There was one important sticking point: Ms. Kroes was adamant that companies that service and distribute the increasingly popular Linux computer operating system, including Red Hat, be able to use the programming manual Microsoft had been ordered to develop. Many businesses favor Linux because its cost is nominal and its underlying programming code is published openly, making it a cheaper, more flexible alternative to Windows. Up to the Judge Microsoft's business model, by contrast, relies on charging licensing fees to use its programming code so that it controls how it is used. Mr. Ballmer was unwilling to let it out too freely. Ms. Kroes's staff stressed they did not seek disclosure of the secret code itself -- just the so-called grammar rules that would let rivals' software communicate

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 12 of 36 better with it. Ms. Kroes and Mr. Ballmer decided not to fight about this contentious point but to let the EU judges in Luxembourg decide it as part of the company's broader appeal. In September, four rivals -- Oracle, Sun, IBM and Novell -- began to evaluate Microsoft's programming manual. Microsoft insisted on elaborate safeguards: The rivals' engineers were allowed to bring only pens or pencils with them into the secure room in Redmond, where the 12,000-page manual could be viewed only on a computer screen, no printouts. Bathroom breaks were monitored by Microsoft security guards. The engineers' verdict: The programming manual was so disorganized as to be useless. It lacked any kind of heading or chapter organization, failed to define programming terms, and was so vast as to be more confusing than helpful. The commission agreed and told Microsoft to return to the drawing board. In October, Mr. Ballmer met again with Ms. Kroes in Brussels. "Look, just tell us what you want us to document, and we'll do it," he said, according to Microsoft and commission officials who were in the meeting.

11. Neelie Kroes is the antitrust enforcer for ______. a. Australia b. Europe Correct c. Africa d. China

12. Many businesses favor ______because its cost is nominal and its underlying programming code is published openly, making it a cheaper, more flexible alternative to Windows. a. Bob b. Orange c. Lineup d. Linux Correct

Questions 13 – 17 from Marketplace

Managing Why Few Women Run Plants By ERIN WHITE May 1, 2006; Page B1 http://online.wsj.com/article/SB114644746946540138.html

PROSPERITY, S.C. -- Two years ago, Lynda McCarty's bosses at Georgia-Pacific Corp. encouraged her to pursue a promotion. After all, she had thrived as manager of GP's lumber mill here since 1997. But Ms. McCarty demurred, fearing the area-manager job would require too much travel away from her daughter, then six years old. Her decision reflects a challenge not just for her, but for GP and other manufacturers. Since 2000, when Georgia-Pacific bought consumer-focused Fort James Corp., maker of products such as Brawny paper towels and Dixie cups, executives have tried to hire and promote more women managers. GP's success in diversifying its executive ranks won it a

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 13 of 36 prestigious award last year. But the company has had a harder time advancing women in operations, where it hasn't met its own goal. The reasons are many. GP seeks engineers for many mill posts, but the mills' small-town locations make it hard to attract the relatively few women engineering graduates. Slow turnover in mill-management jobs limits promotion opportunities. Women must be comfortable as pioneers, supervising men who may never have had a woman boss. GP tries to persuade women to move to different mills for promotions. But as Ms. McCarty demonstrates, the company hasn't solved family concerns. "Lindsey's only in the second grade, and I really don't like traveling too much," she says. At headquarters, GP gave women support by expanding recruiting, pairing them with mentors, encouraging alternative work schedules, offering on-site day care and hosting annual meetings of a "women's leadership forum" to discuss common challenges. In the mills, though, GP, which was acquired last year by closely held Koch Industries, has moved more slowly. There is no on-site day care at any mill. Shift work and the 24- hour nature of mill operations limit flexible-scheduling options. Women managers from the mills weren't invited to the leadership-forum meetings until last year. The result: As of last year, about 29% of GP's employees at the executive-vice-president level were women, up from 9% in 2001. But senior-level women are mostly in staff functions such as finance and accounting, communications, and human resources. In the mills, where many of GP's corporate leaders cut their teeth, only about 17% of the managers are currently women. That is up from about 12% in 2002 but well short of the company's goal of hitting the national level for this category, which is 24%, GP says. Only eight managers of GP's approximately 200 plants are women. Only one of its eight business-unit presidents is a woman, and she was hired from the outside in 2004. Following the Fort James purchase, former Chief Executive A.D. "Pete" Correll, a Georgia native, insisted the company hire and advance more women and minorities to broaden the talent pool and better reflect the diversity of the company's customers. But officials moved gently in the mills because many mill managers were skeptical, says Patricia Barnard, a top human-resources executive who recently retired. Many mill managers believed "that women don't want to do that kind of work," she says. To win over skeptics, GP executives scoured the mill operations for success stories. Ms. Barnard seized on a big, 1,400-worker paper mill in Muskogee, Okla., acquired from Fort James, that makes Mardi Gras napkins, Soft 'n Gentle toilet paper and other products. Karl Meyers, in charge since 1988, had recruited and promoted women partly because the sparsely populated area wouldn't have yielded enough talented employees without them. Mr. Meyers noticed that women spotted things men overlooked. On visits to retailers about five years ago, women employees noticed that the perforation in on-shelf display boxes looked ragged. "We [men] think it's a little thing, but it's not," Mr. Meyers says. The mill worked with a supplier to change the perforation. Today, Mr. Meyers counts several women who have worked their way up from the hourly ranks among his top managers, including the department head for toilet-tissue and paper-towel production. By recounting stories like these, GP executives began to win converts in the mills. Officials also set out to bolster recruiting of women engineering graduates by building closer relationships with professors they hoped would steer candidates to GP. But the pool of women is small and the competition intense. Fewer than 20% of full-time undergraduate engineering students were female in fall 2004, according to the American

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 14 of 36 Association of Engineering Societies. GP and other manufacturers are at a disadvantage because many graduates prefer cosmopolitan areas to the isolated rural locations of many manufacturing sites, says Ralph Mobley, director of career services at the Georgia Institute of Technology. GP, for instance, has mills in Crossett, Ark., and Cedar Springs, Ga., Christine Primmer, 22, a fourth-year engineering student at Georgia Tech, is considering a manufacturing career when she graduates next year. The hands-on nature of working in a plant appeals to her. But small towns don't. Partly for that reason, she is also looking into health-care consulting. "I don't think I would want to develop a career in a place that was very remote," she says. Inside GP, promotions for managers often mean relocating, because there is little turnover at many of the small-town mills. In Prosperity, for instance, Ms. McCarty has eight direct reports, most of whom have been in those jobs since she arrived in 1997. All are male except her administrative assistant. When management jobs do open up, their demanding schedules can deter women with kids. Ms. McCarty has been looking to promote Gloria Wilmore, who manages supply- room inventory. One opening was for a relief supervisor, filling in for supervisors who are sick or on vacation. But the schedule is unpredictable. Ms. Wilmore, a single mother, cares for two daughters and a grandchild. She passed on the job. "It would be real tough," she says. Ms. McCarty, 46, joined GP in 1984 as a shipping clerk in Bay Springs, Miss., her native state. She was promoted to office manager and later offered a slot in GP's training program for mill managers. In 1997, she was offered the job running the Prosperity sawmill, a roughly 100-employee operation in an 1,100-person town about 35 miles from Columbia, S.C. Her husband, a postal worker, agreed to the move. Life was hard at first. The McCartys didn't know anyone in the tightknit community. She was the first woman manager of the mill. "People in the community were like, 'What's she doing?' " Ms. McCarty says. To complicate matters, Ms. McCarty soon learned she was pregnant. She worked 10- and 12-hour days until just before Lindsey was born, winning respect. "Everybody saw I was not going to leave and I was going to hang in there," she says. Most of her employees had never worked for a woman. Early on, she demonstrated her backbone by curbing some workers' "filthy mouths." She won fans by lobbying higher- ups for new equipment and creating a bigger break room. And she learned to strike a balance between setting goals and giving workers autonomy, employees say. "She put it all in my hands," says J.R. Lindler, the plant's recently retired mechanic. She impressed her bosses, too. Output increased as the new machines broke down less often. When customers complained about flaws in the mill's lumber, she worked with GP's procurement staff to get higher-quality trees. All told, she has taken the mill from average profitability in its division to near the top. But when her superiors encouraged her to consider overseeing several mills, she chose not to pursue the promotion. Her husband had offered to help more with child rearing and cooking. But Ms. McCarty wants to be able to spend time with her daughter, watching activities like dance and horseback-riding lessons. Having a young child "just kind of slows you down," she says.

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 15 of 36 13. Georgia-Pacific Corp has had difficulties meeting their quota for hiring women in management positions for the following reason(s): a. women don’t want to deal with “filthy mouthed” mill workers b. demanding schedules can deter women with kids c. the isolated rural locations of many manufacturing sites d. Both b and c Correct

To Snag a Job Offer, Learn What Damage You Do in Interviews By JOANN S. LUBLIN May 2, 2006; Page B1 http://online.wsj.com/article/SB114653031603141039.html

William Olson has switched employers seven times in 25 years, usually because a search firm pursued him. His success stems in part from his refusal to cooperate unless the recruiter promises to give him frank feedback about his performance during interviews. He became a regional manager at Guinness Brewing North America, for example, after a recruiter recommended he tone down his aggressive manner. He rose to the top post there five years later. "With good feedback, you can adapt during the recruitment process," says Mr. Olson, now president and chief executive officer of MRINetwork, a Philadelphia search firm. That's one way to solve a persistent problem. Most job seekers never recognize the shortcomings that kept them from a job -- and so go on to repeat them. The fix: Persuade key players that you will all benefit from an honest reaction. Lacking a strong rapport with a recruiter, you may never learn about mistakes made. "It's not my job to tell candidates why they didn't get the job," especially if they were a poor fit, treated the receptionist rudely or looked disheveled, says Dora Vell, managing partner of Vell & Associates, a high-tech search boutique in Waltham, Mass. Yet sometimes, Ms. Vell does help contenders who help her. She recalls one IBM general manager who lost his bid to run a division of a major business-services company last summer. He talked excessively about his lengthy finance experience during the job interviews. "He spoke like a CFO," she says. When the manager met Ms. Vell for coffee months later, he casually inquired about his failed candidacy. She divulged his blunder because he had opened doors for other Vell clients keen to do business with IBM. "I would definitely present him again for a general manager's position," she says. Try to solicit criticism from recruiters without sounding defensive. "Some of my best clients are former candidates I have coached through more than one search" because they showed willingness to hear constructive feedback, reports Jordan Hadelman, chairman and CEO of Witt/Kieffer, an Oak Brook, Ill., firm specializing in health-care hunts. Well-prepared, neutral questions "can distill out a pretty accurate picture" after a turndown, says Gary Ambrosino, chief executive of Sensicast Systems. The Needham, Mass., manufacturer represents his ninth start-up. He suggests asking a recruiter, "Was there anything that made me less competitive?" Another nonthreatening query: "Tell me about the person who got the job."

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 16 of 36 However, outside recruiters don't always know the real reason that employers reject prospects. And hiring managers rarely cooperate. "They are too busy," a 52-year-old merchandising director frets. Though she has interviewed with nine companies since her August layoff, only one hiring manager provided feedback. When you request a hiring manager's reaction, emphasize your continued interest in working there. The best time "is at the end of your interview," advises Jeff Kaye, CEO of recruiters Kaye/Bassman International in Plano, Texas. "You may reignite interest in a dead deal." He has hired people he initially rejected because they dug hard to understand why or pledged to fix deficiencies he cited -- such as repeating "you know" 64 times within 15 minutes.

14. William Olson’s success stems in part from his refusal to cooperate unless a recruiter promises to give him______. a. frank feedback Correct b. inside information c. interviewer personality profiles d. large amounts of cash for participating

Studios See Big Rise In Estimates of Losses To Movie Piracy By SARAH MCBRIDE and GEOFFREY A. FOWLER May 3, 2006; Page B1 http://online.wsj.com/article/SB114662361192442291.html

The movie industry wanted the world to know exactly how much money it loses to piracy. But now a study shows the damage is far worse than expected, giving some studio executives second thoughts about releasing the information to the public. The Motion Picture Association of America, Hollywood's lobbying group, two years ago commissioned a detailed study that it hoped would pinpoint more precisely how much the industry loses to piracy annually. The study, by LEK Consulting LLC, was completed last year, and people familiar with it say it reached a startling conclusion: U.S. movie studios are losing about $6.1 billion annually in global wholesale revenue to piracy, about 75% more than previous estimated losses of $3.5 billion in hard goods. On top of that, losses are coming not only from lost ticket sales, but from DVD sales that have been Hollywood's cash cow in recent years. The MPAA froze plans to release the survey. Late yesterday, in response to questions from The Wall Street Journal, the MPAA released some information from the survey, including members' U.S. and global piracy losses. "A study this magnitude takes some work to roll out," says an MPAA spokeswoman. She says the numbers weren't far out of line with what the industry expected. For months, MPAA members debated whether and how to release the information. Some studios argued that making the figures public would help the industry win tougher laws and enforcement. Other studios said the figures were so bad that releasing them would hurt their stock prices and make a laughingstock of their enforcement efforts. The result: Piracy, an issue that normally brings Hollywood studios together, was driving them apart. Although the studios eventually agreed to release parts of the information, it was only after months of infighting. Time Warner Inc.'s Warner Bros. and News Corp.'s

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 17 of 36 Twentieth Century Fox fought hardest to release the information, people familiar with the matter say, while Walt Disney Co. and Viacom Inc.'s Paramount were very reluctant. General Electric Co.'s NBC Universal and Sony Corp.'s Sony Pictures fell in the middle, these people say. The estimate showing a dramatic increase in piracy is a function of different methodology used in the report. Previously, people familiar with the matter say, the MPAA used figures based on a series of random calculations that estimated how much was lost in each country. In one market, it was calculated that for every bootleg DVD that turned up in raids, seven more existed. Thus, estimates for piracy losses ran from $280 million in China to $275 million in Russia. There was no previous estimate for the U.S. alone, but in the new survey, losses from piracy are believed to total almost $1.3 billion solely in the U.S. The LEK report provides staggering revisions elsewhere in the world: Mexico overshadows Russia and China to rank as the world's largest market for pirated U.S. films, accounting for an estimated $483 million in lost revenue to MPAA member studios in 2005. That is up from $140 million in 2004 by old tallying procedures, according to partial data the MPAA released in February. The new approach reduces the estimated losses in some of the world's most notorious pirate markets, even as it adds Internet-related losses for the first time. China's losses slipped to an estimated $244 million in 2005, from $280 million in 2004 under the old counting technique. Russia's estimate declined by about $10 million. These international results have also generated skepticism about whether Mexico could really be a bigger piracy market than giants like China. The survey was conducted over 18 months in 28 countries and cost $3 million. It uses more consistent methods and incorporates consumer research for the first time -- in the form of telephone and Internet surveys and focus groups -- to derive estimated losses. In recent months, the MPAA has been fine-tuning the totals after factoring in outside analysis and new information, in some cases lowering the estimated losses -- for example, the losses due to potential customers receiving illegal copies of movies from friends. The previous estimates didn't include the impact of free Internet downloading, which is incorporated in the LEK report. Another surprise involves the fast expansion of online piracy by consumers compared to the losses stemming from professional bootleggers who sell DVDs. Last year, according to a person familiar with the matter, copies of movies downloaded or received from people who had downloaded them cost the studios $447 million in the U.S., whereas copies stemming from professional bootleggers cost the studios $335 million. An additional $529 million in losses came from consumers making copies of legitimate films they bought on DVD or VHS. Critics have faulted some piracy estimates for equating each pirated DVD with a lost sale, when many consumers would have skipped the movie altogether if they hadn't gotten a cheap or free unauthorized version. This time, the survey specifically asked consumers how many of their pirated movies they would have purchased in stores or seen in theaters if they didn't have an unauthorized copy, giving studios a different picture of their true losses. The study also shows that home video, not theatrical distribution, is the market that piracy hits hardest, accounting for two-thirds of the studio's lost revenue. That is a big

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 18 of 36 blow to the studios, which had been counting on the lucrative DVD market to increase their bottom lines, but in recent months have found DVD sales are slowing considerably. The survey also bucks the assumption that piracy is a kids' activity. In Japan, one of Hollywood's biggest foreign markets, 50% of the overall industry's losses are the result of piracy by people ages 25 to 39. While piracy hasn't had much of an impact on the stock prices of the big conglomerates that own studios, that could change if investors feared DVDs would no longer generate sales at the pace they expected, says Michael Nathanson, an analyst with Bernstein Research. "If it became an issue, you would see a collapse in [valuation] multiples," he says. While new data are potentially helpful in negotiating with foreign governments because they also estimate losses to local film industries, the information is also bad news for the MPAA's antipiracy efforts. Those have ranged from public-awareness campaigns to beefing up laws to raids of illegal DVD plants. Dan Glickman, the organization's president for almost two years, has made fighting piracy a priority. He joined the organization a few months after it hired John Malcolm, a former Justice Department official, to head its world-wide antipiracy operations.

15.______overshadows Russia and China to rank as the world's largest market for pirated U.S. films, accounting for an estimated $483 million in lost revenue to MPAA member studios in 2005. a. The United States b. Mexico Correct c. India d. Japan

Tech Companies Check Software Earlier for Flaws By VAUHINI VARA May 4, 2006; Page B1 http://online.wsj.com/article/SB114670277515443282.html

When BlackBerry maker Research in Motion Ltd. developed software in the past, its engineers worked quickly to meet deadlines, sometimes overlooking bugs that were caught later in the process. The result: when issues cropped up after a program had been built, it took immense time and energy to trace its roots. RIM wasn't alone. Many companies rushed to beat rivals with new software, and checking for bugs that could later be exploited by hackers was often seen as a waste of time. That has begun to change in the past few years as new laws force the disclosure of security holes and breaches, and companies increasingly interact with customers through the Web, a front door for threats. Now, many companies, including RIM, are teaching programmers to write safer code and test their security as software is built, not afterward. While the BlackBerry had escaped serious scrutiny for security holes, Herb Little, a RIM security director, worried the company hadn't paid enough attention to the software that runs on the BlackBerry and other devices. "The idea was that we could be doing more," says Mr. Little, who is based at RIM's Waterloo, Ontario, headquarters. "We had to raise the bar."

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 19 of 36 Mr. Little soon discovered Coverity Inc., a San Francisco start-up that sells tools to automatically check for software flaws. Now Mr. Little uses Coverity every night to scan the code turned in by engineers. The tool sends Mr. Little an email listing potential red flags. He figures out which problems are real and tracks down each offending programmer, who has to fix the flaw before moving on. Mr. Little has also ramped up security training and requires programmers to double-check each others' code more regularly.

16. Many companies rushing to beat rivals with new software, considered checking for bugs that could later be exploited by hackers as _____. a. a waste of time Correct b. a good use of time c. a great use of time d. the most important use of time

Darwin Revisited: Females Don't Always Go for Hottest Mate By SHARON BEGLEY May 5, 2006; Page B1 http://online.wsj.com/article/SB114678722314044356.html

At first glance, the "sexy son hypothesis" makes perfect sense. According to this pillar of evolutionary biology, a female who chooses a high-quality male will have sons who inherit dad's allure. They, too, will therefore have their pick of females, allowing mom to hit the jackpot: grandmotherhood. But when scientists followed male flycatchers whose dads were real catches (as judged by a forehead patch that is this bird's equivalent of perfect abs), they found no such thing. The sons "did not inherit their father's ... mating status," the Swedish researchers wrote in the February issue of American Naturalist. As a result, mom got fewer grandkids than did females who settled for less-attractive males. The studs were so busy mating they had no time to raise offspring, causing their health and fecundity to suffer. Homelier birds were better dads, raising sons who had more mating success. Poor Darwin. After he developed his theory of how organisms change through variation and natural selection, his thoughts turned to sex. Because females have few eggs (compared with males' limitless sperm), their best strategy is to select the highest-quality males for mates, he wrote in 1871. That way, their progeny also would have superior traits. The offspring would survive and reproduce better, making mom's fondest wish -- to become a grandmother -- come true. (In evolution, success means reproduction, not only for you but for your descendants unto the nth generation, too.) The theory of sexual selection -- that females choose males with the best genes, causing those genes to become more prevalent in succeeding generations -- is invoked to explain why peacocks have rococo tails and bucks have huge antlers. Neither trait has real survival value, but females choose males that have them, exerting selective pressure for ever-showier versions. Or so textbooks say. Just as Darwin's theory of natural selection is under attack by America's religious right, his less-known theory of sexual selection is catching flak from some biologists. "In a number of species, reproductive behavior does not conform to

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 20 of 36 Darwin's theory of sexual selection," says biologist Joan Roughgarden of Stanford University. "The idea that females choose the genetically best males is wrong. Instead of choosing mates who will increase the genetic quality of their offspring, females make choices that will increase their number of offspring." As in the flycatcher study, mating with "sexy" males isn't necessarily the way to a plethora of descendants. True, in species where males contribute nothing but genes to offspring, this strategy may work. But biologists are finding more and more examples where females benefit from a different strategy.

17. The theory of sexual selection says that ______. a. females choose males with average genes b. males choose females with average genes c. males choose females with the best genes d. females choose males with the best genes Correct

Questions 18 – 23 from Money & Investing

Danish Economist Isn't Very Cool Among Icelanders By CRAIG KARMIN April 29, 2006; Page B1 http://online.wsj.com/article/SB114627071540139472.html

Ever since he wrote a report saying Iceland's economy is in trouble, life hasn't been the same for Carsten Valgreen. Nearly 600 years of history may be partly to blame. In the past few weeks, the mild-mannered economist from Denmark has burst onto the public consciousness in Iceland. His work has been denounced by Iceland's prime minister as "absurd," he's been blasted by Iceland's Ministry of Finance, and grilled on Iceland's version of "60 Minutes." (Also on that day's show: Silvia Nott, a 22-year-old Icelandic starlet who wears sparkly makeup and feathery costumes.) All of which has left Mr. Valgreen, chief economist at Denmark's biggest bank, feeling picked on. After all, Iceland's economy does look as if it's in trouble: Its stock market has tumbled nearly 20% in two months, and the currency, the krona, has weakened dramatically. The anger at Mr. Valgreen may be more historic than personal. For centuries, Denmark has been the top dog among the two Nordic neighbors: Denmark started ruling Iceland in the 14th century, and never really let go. Only in 1944 did Iceland become fully independent. And only in 1997 did Denmark finally return the last of Iceland's prized Norse manuscripts -- an affront dating back to the 18th century. As a Danish critic of Iceland, Mr. Valgreen was touching a sore spot. "I expect to be hit with tomatoes when I arrive there," the 37-year-old said in early April, just before heading to Reykjavik for a panel discussion on the Icelandic economy. He wasn't hit with tomatoes, but he was mocked by the nation's largest newspaper in a cartoon that portrayed him as a no-talent hippie artist. "They're taking it very personally," Mr. Valgreen says. Iceland's problem is that its tiny economy has been getting whipsawed the past few years. First, foreign money poured into the country to take advantage of its relatively high

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 21 of 36 interest rates, helping fuel a housing boom and rapid economic growth. Then, as interest rates started creeping back up in places like the U.S. and Japan, the foreign funds flooded right back out. It's transformed the tiny nation of 300,000 into a poster boy for how fast- changing global money flows can make or break economies. Adding to the cross-border strain is the fact that, until its troubles in the past month or so, Iceland was doing much better economically than Denmark. That role reversal means "these old tensions have flared up again," says Kirsten Wolf, a professor of Scandinavian Studies at the University of Wisconsin. "If a German or American made those comments, I don't think it would have been as big of a deal." Indeed, many other firms, including Merrill Lynch & Co. and Barclays PLC's Barclays Capital, have also issued stinging reports. Analysts around the world have cited Iceland as a cautionary tale for other countries facing similar economic problems, such as excessive short-term debt and rising interest rates. Some analysts believe countries including New Zealand, Australia and Turkey could be at risk. In Iceland Mr. Valgreen's words had a particular impact. Iceland's stock market tumbled 3.5% right after the release of his report for Danske Bank, which predicted the Icelandic economy could shrink by 5% to 10%, and that Iceland might not merely face recession, but also "a severe financial crisis." Perhaps most offensive of all to Icelanders was Danske Bank's comparison of their country -- which now has one of the world's highest standards of living -- to much poorer Thailand during the Asian economic crisis in the late 1990s. "It was almost amusing reading that," says Ludvik Eliasson, the senior economist for Iceland bank Landsbanki, sounding not at all amused. Mr. Eliasson predicts his country will not only avoid a crisis, but that the economy will continue to grow. Mr. Valgreen hasn't hid from his critics. During his interview on "The Spotlight," a popular Icelandic news magazine, he endured a 10-minute grilling, which started with an accusation: "Your report is rather drastic -- why?" Iceland and Denmark have had their share of rough spots. Starting in the 16th century, Copenhagen imposed Lutheranism on Iceland and also beheaded Jon Arason, the country's last Catholic bishop. In the 17th century, Denmark demanded exclusive trading rights with Iceland, contributing to economic stagnation that Iceland only recently started to put behind it. The economic relationship between the two countries has historically been so bitter, it's cited as an example in the recent economics best seller, "Collapse: How Societies Choose to Fail or Succeed." Author Jared Diamond points out that Denmark did try to introduce innovations intended to improve Iceland's economy, such as better fishing nets and new fishing techniques, as well as rope-making and sulfur-mining. But the Danes "found that Icelanders' routine response was 'no,' regardless of the potential benefits for the Icelanders," the book states. Mr. Diamond makes clear that Iceland's economy eventually succeeded by opening to trade and through harnessing geothermal and hydroelectric power. Over the past several years, the country has liberalized further, scrapping currency controls, privatizing businesses, and increasing trade with the European Union. Recently, Icelandic corporate raiders have bought up large stakes in prominent U.K. retailers. These Icelandic investors have also turned their sights on their former masters, buying up

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 22 of 36 Danish property companies, electronic retail chains and the popular department store Magasin du Nord. "Seen historically," says Christine Ingebritsen, an associate professor of Scandinavian Studies at the University of Washington, "that's turning the tables on the Danes." But Iceland's latest preoccupation with Denmark has focused on Mr. Valgreen. Critics charge that the Dane took glee in their country's recent misfortunes. Some also accuse him of getting his facts wrong. They point to reports from credit-rating agencies Standard & Poor's and Moody's Investors Service that were more confident about the economy's ability to stave off crisis. S&P, for instance, cited stable political institutions and government budget surpluses. Mr. Eliasson of Landsbanki also points out that Danske Bank acknowledges in its report that it doesn't cover Iceland's economy regularly. "And there is no reason to doubt that," he says dryly.

18. In Iceland Mr. Valgreen's words had a particular impact. Iceland's stock market tumbled ____ right after the release of his report for Danske Bank, which predicted the Icelandic economy could shrink by 5% to 10%, and that Iceland might not merely face recession, but also "a severe financial crisis." a. 1.5% b. 2.5% c. 3.5% Correct d. 4.5%

Fresh Crop of Investors Grows in Silicon Valley By PUI-WING TAM May 1, 2006; Page C1 http://online.wsj.com/article/SB114644681083840126.html

Aydin Senkut, a onetime senior manager at Google Inc., made tens of millions of dollars exercising his stock options after the search company's 2004 initial public offering. He bought a Lamborghini and two multimillion-dollar homes in the San Francisco Bay Area. He retired. Now he has found a new place to spend his money: on start-ups. Since February, Mr. Senkut, 36 years old, has put money into five Silicon Valley technology start-ups and has lined up several similar investments. Becoming suddenly wealthy, "at first I thought I'd have nothing to do with the Internet or high tech again," he says. "But I realized I knew nothing about retail or restaurants. I needed to come back to what I know." As those in Silicon Valley begin harvesting bigger returns from stock options and an improving tech economy, they aren't just spending their new wealth on Ferraris, mansions and Aspen vacation villas. Instead, some of the newly rich are playing financier. These private investors have become a new middle class of investor in Silicon Valley and are helping to spur a revival in so-called angel investing. Angel investors often provide the earliest funding for entrepreneurs building new companies. In return for a stake in the budding company, they typically invest anywhere from $25,000 to $100,000 of their own

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 23 of 36 cash, feeding a Silicon Valley start-up culture that is perpetually looking for the next big thing. Venture capitalists, by contrast, typically raise millions of dollars from institutional investors and create funds that invest in multiple companies. Angel investments, which faltered during the tech bust, rose to $23.1 billion last year from $15.7 billion in 2002 -- though still below the $30 billion raised in 2001 -- according to the Center for Venture Research at the University of New Hampshire. The resurgence is partly owing to techies cashing in stock options at a rate not seen since 2000: In fiscal 2004, named executive officers at Silicon Valley's 150 biggest companies cashed in $1.55 billion of options, up 50% from 2003 and up nearly threefold from 2002, according to compensation-research firm Equilar Inc. Many of today's new angels appear to be a different breed. Old-school angel investors tended to be founders or the highest-level executives in tech companies. Andy Bechtolsheim, a famous angel investor in Google, was a co-founder of Sun Microsystems Inc.; Ram Shriram, another angel investor in Google, was a top executive at Netscape Communications Corp. and Amazon.com Inc.; Microsoft Corp. co-founder Paul Allen is another old-school angel. Now, "as the level of wealth in the Valley has increased, people that have been executives and managers at tech companies are personally investing in a lot of start-ups," says Ed Colligan, chief executive of mobile-device maker Palm Inc. in Sunnyvale, Calif. "There's almost a new middle class of investors." Among them are former managers like Mr. Senkut and Corey Cleek, a onetime senior manager of Internet marketing at eBay Inc. He recently left the San Jose, Calif., Internet auctioneer after working there for five years and profiting from his eBay stock options. The 34-year-old began putting money into start-ups in 2004. While he declines to specify how many start-ups he has bankrolled, he says he typically invests $25,000 to $100,000 in a company, particularly if the ventures are in Internet media and electronic-commerce. Mr. Cleek still counts himself as a working stiff. Several months ago, he moved to Nashville, Tenn., to join a digital music start-up as its general manager. Every few weeks, he commutes back to Silicon Valley to check on his angel investments. "I make the time for angel investing because it's a passion," he says. The re-emergence of angel investing may be a sign of froth in the tech market. During the dot-com boom, many individuals rushed to put money into start-ups just as tech stocks were nearing their zenith. When the bubble burst, many of these investors lost their shirts. "Angel investing is highly dangerous," says Naval Ravikant, a tech entrepreneur who lost money on some angel investments he made earlier this decade. "It's a game of poker" because so few investments typically succeed, he says. In general, angels say half of the start-ups they invest in likely will fail. Today's angels say they are aware of such risks, but add that they expect one or two good deals to outweigh the bad ones. Gil Penchina, an eBay vice president, says his strategy is to invest in as many start-ups as possible. "I subscribe to the theory that you take as many bets as you can," says Mr. Penchina, 36. "Angels are looking for a return of 25 to 50 times what they put in, so if even one deal pays off, you're in good shape." The new angel activity is proving to be a boon for entrepreneurs such as Rob Crumpler. The chief executive of BuzzLogic, a 20-month-old start-up in San Francisco, began raising funds for his Internet software company in February. Within eight weeks, he had

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 24 of 36 raised his target of $750,000, plus an additional $100,000, all from angel investors. Mr. Crumpler says raising the $850,000 was "definitely easier" than he had anticipated. For Mr. Senkut, the former Google middle manager, angel investing wasn't the first place he spent his newfound wealth. The native of Turkey, who previously worked at Silicon Graphics Inc., joined Google in 1999 as its 63rd employee. He worked as a product manager and as a senior manager of strategic-partner development, which involved him in licensing Google's search engine and doing ad-syndication work internationally. In August 2004, Google's IPO turned Mr. Senkut, who joined the company early enough to get thousands of stock options, into a multimillionaire. While he declined to specify how much he made, he acknowledges he was able to "capitalize beyond my imagination" and no longer needs to worry about his financial future. Mr. Senkut took a sabbatical from Google in April 2005, and officially left the company in October. He bought a $5.7 million home in a town near Google's headquarters in Mountain View, Calif., and bought another $2.65 million home in San Francisco, according to public property records. He shelled out for a Lamborghini, which car dealers say typically start at $200,000. He hired a personal trainer at $60 an hour and vacationed with his parents at a medieval chateau in France. "After six years at Google, I wanted to take time off," Mr. Senkut says. "I wanted to share with my family." After decorating his new homes, Mr. Senkut considered what else to do with his money, including opening a restaurant or a store. But he concluded he should go back into something he knew: technology. He began meeting with his Silicon Valley contacts late last year, including venture capitalists and old-school angel investors, to learn about start- up investing and to hear about deal opportunities. In February, he put money into an Internet media and social-networking start-up. Since then, he has invested in several other companies, including in BuzzLogic and in Internet-video start-ups. Georges Harik, 34, an engineer who was one of the first dozen employees at Google, left the search company last November after making millions by exercising stock options. Mr. Harik has since made about six angel investments of about $20,000 to $80,000 each, primarily in Internet start-ups. Messrs. Harik and Senkut say they often discuss potential investments together.

19.______investors often provide the earliest funding for entrepreneurs building new companies. In return for a stake in the budding company, they typically invest anywhere from $25,000 to $100,000 of their own cash, feeding a Silicon Valley start-up culture that is perpetually looking for the next big thing. a. Maiden b. Celestial c. Angel Correct d. Prime

Full Larders By JUSTIN LAHART May 2, 2006; Page C1 http://online.wsj.com/article/SB114653012831141034.html

If you build it, they will come.

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 25 of 36 Well, not always. When auto makers report April sales today, it won't look like consumers showed up. Anecdotal reports suggest many dealerships had a hard time pushing cars off their lots for the month. Edmunds.com, a Web site dedicated to auto- industry issues, says domestic vehicle sales declined for the month from a year earlier. A weekly survey of dealers from research firm ISI Group showed sales weakened. With gasoline prices shooting higher, General Motors and Ford Motor seem to have had the toughest time, as customers eschewed SUVs for more fuel-efficient fare. Weak sales would leave GM in particular in a bind. In the first quarter, it increased production even as sales fell versus year-ago levels. Perhaps it was an insurance measure aimed at having enough supply on hand if workers at Delphi, its main supplier, go on strike later this year. Either way, the effort pushed up its inventory of unsold vehicles by about 120,000. Will dealerships be willing to take on more supply, with the sales environment weak and higher interest rates raising the cost of carrying excess inventory? If not, GM and other auto makers may end up having to cut production and wait for inventory to clear out. Or they might try to help the process along by offering customers new incentives -- a dangerous tactic that so far GM seems eager to avoid. The car makers aren't the only businesses running into inventory issues these days. Chip makers like Intel and SanDisk are saddled with stockpiles they're trying to work off. And last week The Wall Street Journal reported Wal-Mart Stores is pushing suppliers to help it reduce inventories. That left some suppliers with more stock on hand than they bargained for -- and a need to reduce their own production while that stock gets whittled down. Analysts at Goldman Sachs, polled by the firm's economists, say inventory levels at the companies they cover have risen over the past two months, and yesterday's manufacturing report from the Institute for Supply Management pointed to higher inventory levels. That could mean lower output in the months ahead, as companies work off some of the excess.

20. Edmunds, a Web site dedicated to auto-industry issues, says domestic vehicle sales ______for the month from a year earlier. a. declined Correct b. increased c. doubled d. tripled

Blocking Data at China's Whim Poses Risky Dynamic for Tech Firms By JESSE EISINGER May 3, 2006; Page C1 http://online.wsj.com/article/SB114661980708242214.html

Here's another do-gooder campaign shareholders might be tempted to ignore: Amnesty International next week plans to use Google's annual meeting to call on it and Microsoft to stop cooperating with censors in China.

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 26 of 36 Shareholders should take heed, and not just because it's morally repugnant to collaborate with repression. In the short term, it's obviously good business to be in China, but there are longer-term consequences that should be considered. After initial resistance, Google agreed to censor its search engine, preventing users from finding useful information on Falun Gong or the Tiananmen Square massacre. Microsoft has censored some of its content. They aren't alone. Cisco Systems has sold equipment that the authorities used to build what is now called the Great Firewall of China. Yahoo has been the most egregious, turning over email data that Chinese authorities used to identify three dissidents who were then imprisoned. There's been some political fallout from all this, but some of that has been opportunistic lashing out reflecting general anxiety over China. One never feels charitable about one's banker. There is a measure of hypocrisy, too, given revelations about American abuse of detainees and wiretapping. And despite the repression, China's government has offered stability and economic opportunity for hundreds of millions of people. American tech companies say they are simply complying with the laws of the land to avoid getting kicked out. But they could resist more forcefully, as they do when protesting China's failure to protect intellectual property. They are willing to cave on human rights for a simple and understandable reason: They feel they can't afford not to be in China. Yahoo has condemned governmental punishment of free expression and says it is discussing with other tech companies voluntary guidelines for doing business in China. Microsoft says it only follows legally binding censorship orders. Cisco says it merely sold China off-the-shelf products that could be used for numerous purposes. Google says it agonized over launching a censored, local search engine early this year. But the company decided that offering is better than its older offshore service, which was slower than services of Chinese competitors and vulnerable to wholesale government shutdowns. It had a choice: Either have no operations and employees in China and face an "ever grinding of market share to zero," says Andrew McLaughlin, the company's head of public policy. Or get "the greatest amount of information into the greatest number of hands ... to contribute to an overall expansion of the range and type and quality and access to information." Inevitably, that led to "making the ugly compromises." To Google's credit, it discloses to Chinese users and outsiders what is being censored. It keeps servers for message boards, blogs and email offshore to avoid Chinese government demands for such private data. Let's not pretend that this controversy is a key issue for American tech companies' share prices. Clearly, China is a huge and growing market for American tech companies. But right now it's only a modest contributor to profits, with an Internet market that is smaller than some European countries'. There's no reason to rush in without fighting for the right to market the best possible product. What will Chinese consumers think of the watered-down products? Google offers the fastest, deepest and most precise search in the world -- but limits itself in China. The company is already operating at a disadvantage to local competitors well attuned to local tastes, and now it's giving up some of its technological superiority. Google responds that its searches are faster and less censored than those of local competitors.

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 27 of 36 There is also a slippery-slope potential. Emboldened by tech companies' eagerness to play in China, why wouldn't the government try to use its might to give favored local companies a competitive edge? Or perhaps it might censor information that is vital to conducting business there. "What if the government doesn't want to let people know the banking system is weak?" says Arvind Ganesan of Human Rights Watch. "Today it's political censorship. Tomorrow, it's central-bank reserves." There also is the risk to tech companies' reputations. Yahoo and Google have faced a PR backlash, including an unflattering congressional hearing that has helped take the shine off of Google's "Don't Be Evil" motto. There's a reason companies respond to political pressure on human-rights issues, as many did during the Apartheid era in South Africa: To protect their most important bottom-line asset -- their brand. Finally, there's the inconsistency of lobbying for intellectual-property rights while not standing up for other rights. American companies are acting as if they think that if they give a little on liberty, they can make progress on issues of lucre. But this actually could undermine their case. If the Chinese government sees how compliant they are in one arena, perhaps it will find it that much easier to blow off concerns about patents and piracy.

21. Google offers the fastest, deepest and most precise search in the world -- but limits itself in ______. a. Korea b. the United States c. China Correct d. Cuba

Shoppers Flock to Target, But Not Investors By ANN ZIMMERMAN May 4, 2006; Page C1 http://online.wsj.com/article/SB114670801519143420.html

Style-conscious bargain hunters love Target, but investors prefer to shop elsewhere. By almost every measure, Target Corp. is a retailing darling. The Minneapolis-based discounter lures shoppers with its smart-looking products, name-brand designers, airy aisles and affordable prices. Last year, Target racked up a 5.6% gain on sales at stores open at least a year. That compares with a 3.6% increase that rival Wal-Mart Stores Inc. posted for the period. And sales are still going strong. Today, Target expects to report a jump of 10% in such same- store sales for April. That is boosted in part by Easter -- a big holiday for apparel sellers -- landing in the month, versus a month earlier last year. But taken together, Target will notch at least a 12.5% increase for the March/April period, compared with a 7.5% rise last year. Yet Target's stock is down 2.6% so far this year, while the Dow Jones Industrial Average is up 6.4% and the DJ Wilshire Retail index is up about 3%. In 4 p.m. New York Stock Exchange composite trading yesterday, Target's shares were down seven cents to $53.52, giving the company a market value of $47.39 billion.

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 28 of 36 With about 1,400 stores in the U.S. and sales of $53 billion last year, Target is where the Wal-Mart juggernaut, with roughly 3,900 stores currently, was about 10 years ago. But instead of investors rewarding Target richly, they treat it the same as its Bentonville, Ark., competitor, which faces slowing sales growth and profit-margin pressure. Both companies trade at about 16 times this fiscal year's estimated earnings. Adrianne Shapira, a retail analyst at Goldman Sachs who recently upgraded Target to a "buy" with a fair-market estimate of $60 a share, thinks Target's stock is unfairly hurt because of Wal-Mart's much-publicized effort to upgrade its merchandise and store ambiance. "People think Wal-Mart doing better has to come out of Target's hide, but it's not a zero-sum game," says Ms. Shapira, who doesn't own any shares of Target. Goldman has done investment-banking business with the retailer in the past year. "Besides, Target doesn't have to turn anything around," Ms. Shapira adds. "They just have to keep doing what they're doing." In some ways, the stars are aligned to allow Target to do just that. Target was founded by people from the department-store industry, and it practically created the cheap-chic category of retailing. Now, the consolidation of the department-store sector paves the way for more customers to migrate Target's way, especially if Federated Department Stores Inc. aims some of the May chain's stores at a more upscale market and Sears Holdings Corp. keeps missing the mark with its outlets. At the same time, Target has a higher income demographic than Wal-Mart, so its customers' discretionary spending is more cushioned from spiraling energy costs -- particularly at the gasoline pump. Using a barrage of television and print advertisements, Target has lured upscale shoppers by stocking clothes and household appliances from trendy designers like Isaac Mizrahi, Liz Lange and Michael Graves. The consolidation among apparel manufacturers means some hot brands could soon be available for Target shelves. That is because several designers and manufacturers that once cared more about cachet than cash now have private-equity owners who know that Target is a sure-fire way to speed up the return on investment by carrying their styles. When it comes to financial results, Target management lately has a reputation for conservative promises and then beating its predictions. The company has warned Wall Street not to expect improvements in Target's gross profit margin for the rest of the year. However, Charles Grom, a retail analyst at J.P. Morgan Securities, says Target, which saw its margins rise last year, is poised to do it again. "With inventories in great shape, strong same-store sales numbers and store checks suggesting little markdown activity, I believe Target could outperform in the first quarter," he says. "Importantly, this isn't in the stock, in my opinion." Mr. Grom, who doesn't own Target shares, rates the stock "overweight." J.P. Morgan does business with Target. Wall Street also considers Target's credit-card business a lucrative opportunity. Analysts think there is a good chance that Target will put that unit on the block and say it could fetch as much as $6.1 billion -- the amount of its receivables. "We have no plans to sell our credit-card operation at the current time, because it is integral to our core retail business, strengthening our guest relationships, building loyalty to our brand and fueling incremental sales and profits," says Cathy Wright, Target spokeswoman. "It is so highly profitable, we don't believe that there is incremental value

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 29 of 36 to be captured in selling the business that isn't being realized through its continued operation and earnings stream." Patricia Edwards, managing director and retail specialist at investment-management firm Wentworth, Hauser & Violich in Seattle, says the firm has been adding to its position in Target in recent months as fast as she has been adding Target merchandise in her own home. Wentworth Hauser, which manages $8 billion, held 800,000 Target shares as of the end of February. Ms. Edwards points to Target's recent decision to stock trendy black-and-white dishes -- the same color scheme being used by many higher-end home-decor stores. Says Ms. Edwards: "As they used to say about Wayne Gretzky, Target does a phenomenal job of skating where the puck is going to be."

22. With about 1,400 stores in the U.S. and sales of $53 billion last year, Target is where the Wal-Mart juggernaut, with roughly 3,900 stores currently, was about ____ years ago. a. 5 b. 10 Correct c. 15 d. 20

Growth Funds Shift Away From Tech To Old-School Heavy-Industry Names By DIYA GULLAPALLI May 5, 2006; Page C1 http://online.wsj.com/article/SB114679219756344522.html

Mutual funds that focus on "growth" stocks -- especially the large ones -- aren't just about technology shares anymore. Many investors still cling to the image of funds like these being glorified tech funds, a vestige of the dot-com days when such stocks were king. However, managers of large- stock growth funds (which try to invest in sizable companies experiencing a growth spurt) are steadily returning to stocks they haven't considered growth investments for decades. The extent of the shift might surprise some investors. Several of the best-performing funds in the category have slashed their technology holdings to a quarter from half of their portfolios early this decade. They are beefing up on stodgier picks in the construction, rail and manufacturing areas. Stocks like construction-equipment maker Caterpillar Inc., rail operator Burlington Northern Santa Fe Corp. and oil-field-services company Schlumberger Ltd. now rank as favorite industrial holdings. Top-performing large-stock growth funds are about 25% invested in technology now, down from 37% three years ago, according to fund researcher Morningstar Inc. Meanwhile, manufacturing stocks have increased in these portfolios to 24% today from 15% in 2003, thanks to an emphasis on energy and industrial-materials stocks, which include companies in aerospace and machinery. Something definitely needed to change. Large growth funds have been one of the worst- performing categories among mutual funds recently. Such funds have returned 2.83% compared with 7.68% for U.S. diversified stock funds this year through April, and an

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 30 of 36 average of negative 0.92% a year over the past five years, versus a gain of 4.72%, according to Lipper Inc.

23. Large-stock growth funds try to invest in _____. a. sizable companies experiencing slow growth b. small companies experiencing a growth spurt c. small companies experiencing slow growth d. sizable companies experiencing a growth spurt Correct

Questions 24 – 26 from Personal Journal, Section D

As Marijuana Use Rises, More People Are Seeking Treatment for Addiction By KEVIN HELLIKER May 2, 2006; Page D1 http://online.wsj.com/article/SB114652509054640879.html

People are aware of the addictive potential of alcohol, cocaine, heroin, even gambling. But the perception persists that marijuana isn't addictive. The doggedness of this myth may be attributable to the campaign to legalize the drug, as well as the comparatively subtle costs of marijuana addiction. But there is virtually no debate among American researchers, who have been documenting and studying marijuana addiction for more than two decades. Now, Cambridge University Press has combined the results of their federally funded studies -- most already published in peer- reviewed journals -- in a new book called "Cannabis Dependence." The book offers substantial scientific evidence of what Marijuana Anonymous members know firsthand -- that the euphoria induced by THC, the active ingredient in marijuana, can be addictive. Studies show that between 2% and 3% of U.S. marijuana users become addicted within two years of first trying the drug, which is scientifically known as cannabis. About 10% of those who try it become addicted at some point. Now, addiction-treatment statistics are showing dramatic growth in marijuana-related problems. A study issued last month by the University of Maryland's Center for Substance Abuse Research examined the drug of choice for Americans seeking treatment for addiction during the decade that ended in 2003. It found that the percentage of addicts who cited marijuana as their primary problem more than doubled to 16% from 7%, while alcohol fell to 41% from 57%. Among illegal drugs, only opiates ranked higher than marijuana as a problem for treatment seekers. Marijuana's rise in the ranks of problem drugs may reflect a big spike in usage. The number of Americans age 12 and older using marijuana at least once a month jumped to 14.6 million in 2004 from 10.1 million in 1996, according to the federal Substance Abuse and Mental Health Services Administration, which adds that some of that jump may be attributable to a change in surveying methods. To study marijuana addiction, the contributors to "Cannabis Dependence" -- a group of researchers at universities across the U.S. -- published newspaper advertisements offering treatment to people unable to quit using the drug. Invariably, hundreds stepped forward. The typical volunteer was a white-collar man in his thirties who smoked marijuana daily and didn't much abuse alcohol or other drugs. "Their substance of choice is marijuana,"

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 31 of 36 says Roger A. Roffman, an editor of "Cannabis Dependence" and a University of Washington professor of social work. The researchers found that the overall rate of addiction among marijuana users is slightly lower than for imbibers of alcohol. But among people who use marijuana daily, the rate of addiction is significantly higher than among daily drinkers. Addiction is diagnosed when a person experiences at least three of seven indicators, such as failure to control usage, preoccupation with the drug and withdrawal symptoms. The addictiveness of marijuana is underappreciated in part because legalization advocates tend to play down the problem. But a bigger factor may be that marijuana addiction typically doesn't kill, wreck careers, ruin health or otherwise wreak the sort of tragedies that make headlines. Although studies suggest that marijuana can cause neurological and cardiovascular damage, that evidence remains inconclusive and largely connected to smoking the drug, which isn't necessary. Marijuana-enriched olive oil can deliver a powerful high. Yet if marijuana addiction were benign, thousands of Americans wouldn't be seeking to kick the habit each year. In treatment, many express a sense of being unable to move forward in their personal and professional lives while in a constant state of marijuana intoxication. Often, marijuana addiction damages relationships. Its illegality can get a user arrested. Then there are the symptoms of withdrawal: "irritability, anger, nervousness, sleep difficulty, change in appetite, physical discomfort," says Alan J. Budney, a University of Arkansas for Medical Sciences addiction specialist. The typical absence of dramatic consequences can make marijuana addiction difficult to break. The memory of brushes with death, jail and destitution can help keep a heroin user or alcoholic from relapsing. But the more-subtle costs of marijuana addiction are easier to forget. Research shows that staying clean is just as hard for marijuana addicts as for heroin addicts, says Robert S. Stephens, chairman of psychology at Virginia Tech University and "Cannabis Dependence" editor. Initially, meetings of Alcoholics Anonymous and Narcotics Anonymous provided little help to a Chicago marijuana addict named Bob, who asked that his last name not be used for this article. "I would hear people talk about liver damage, job losses, broken marriages -- stuff that had never happened to me," says Bob, a white-collar worker in his late 20s at that time. On the surface, his life appeared to be well-managed. He was pursuing a college degree at night and competing in triathlons on weekends. But his sense of accomplishment was utterly undermined by his incessant need to sneak off and smoke joints. He even bought a car expressly for the purpose of having a private place to get high on his lunch hour in downtown Chicago. For an entire decade, he got high about four times a day. Ultimately, he came to realize he was no less an addict than is the alcoholic or the heroin user. His last toke came in November of 1998. Soon afterward he started a Chicago meeting of Marijuana Anonymous. After seven clean years, he says, he still has cravings: "I'll catch a whiff of pot on the street, and my mouth starts watering."

24. The typical absence of ______can make marijuana addiction difficult to break. a. hangovers

Spam Filters Gone Wild Spate of Incidents at Verizon, AOL Point to Growing Problem Of Blocking Legitimate Email By JESSICA E. VASCELLARO May 3, 2006; Page D1 http://online.wsj.com/article/SB114661393481042025.html

Internet companies are taking more aggressive steps to stop the flow of unwanted email. In a significant number of cases, though, consumers complain that the efforts increasingly are blocking the good along with the bad. Possibly millions of AOL members were temporarily unable to receive some mail from Google Inc.'s Gmail users last week after AOL held up messages from some new Gmail servers over concerns it might be spam. An AOL software update recently resulted in a stoppage of mail that mentioned at least 60 Internet addresses. An update of Verizon Communication Inc.'s spam filters recently sparked widespread complaints from consumers who were unable to receive and send messages. The companies blamed the problems on software glitches or communication failures and often fixed them within hours. Tight precautions are necessary, the companies say, since spam can threaten online security and safety -- a more serious problem than the nuisance of a few missed messages. But others say the incidents are a troubling sign that new antispam measures may be going to far, contributing to everything from lost real-estate deals and blocked banking transactions to bruised relationships caused by unreturned emails that never got through to friends in the first place. Recently, Mark Fleischer, a 24-year-old commercial real-estate broker in Tampa, Fla., was waiting for his client's final approval to go ahead and bid on a $175,000 condo after emailing him a list of the prices for comparable properties. But Yahoo Inc. blocked his client's response telling him to go ahead with the deal, and Mr. Fleischer lost the sale. Yahoo says in such cases it aims to help the sender fix the problem by sending him a rejection message with informational links. As much as 20% of legitimate bulk commercial email -- which includes mail users sign up to receive as well as online statements and receipts -- gets caught in spam filters, according to Ferris Research, a San Francisco-based market researcher. The best filters, however, make such mistakes for email between acquaintances only about once a month, according to Ferris. Most state-of-the art filters now employ filtering techniques that typically involve examining the language in the email (does it include combinations of words often found in spam but not legitimate email?), the mail server sending the email (it is a computer that appears to be affected by a virus?) and past messages from the sender (has it sent spam before?). They also are asking their customers to help. AOL, a unit of Time Warner Inc., stores messages its users report as spam in a database it analyzes for patterns. Yahoo continually adjusts its technology based on its members' use of a "This is spam/Not spam" buttons.

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 33 of 36 The steps are generating victories in the war on spam. The number of spam messages the average consumer receives annually fell 17% to 3,253 in 2005 from 2003, according to Jupiter Research, and is expected to plummet to 1,640 by 2010. AOL says its members report that the amount of spam in their in-boxes has fallen by more than 75% since the fall of 2003.

25. As much as ______of legitimate bulk commercial email -- which includes mail users sign up to receive as well as online statements and receipts -- gets caught in spam filters, according to Ferris Research, a San Francisco-based market researcher. a. 10% b. 20% Correct c. 30% d. 40%

A New Generation Gap: Differences Emerge Among Women in the Workplace By JEFF ZASLOW May 4, 2006; Page D1 http://online.wsj.com/article/SB114670525029943363.html

Alison Brod runs her own New York public-relations firm, with 38 staffers, all female and most in their 20s. "They tend to be ambitious, creative, beautiful and sweet," says Ms. Brod. But because many of her employees wear micro-minis or belly-revealing shirts, she keeps a rack of more-modest clothing in the office. When she asks them to change clothes before seeing certain staid clients, they pout but comply. "I feel like a lecturing grandmother," says Ms. Brod, who is 36 years old. She also notices that many young staffers don't spell-check their writing, and are haphazard about capitalization. "Their mindset is completely casual in every single way," she says. Male managers, as they have for centuries, tend to interact with younger male subordinates in familiar patterns -- some paternal, others more jocular. It's a far newer and less certain game for female leaders trying to navigate generational relationships. As Ms. Brod has learned, some female bosses from Generation X (born between 1965 and 1980) are finding a clear generation gap with female employees from Generation Y (born after 1980). Likewise, some female bosses who are baby boomers (1946 to 1964) or from the World War II generation (born before 1945) often have trouble relating to women born at other times. These struggles can hamper mentoring and damage productivity. Workplace researchers lately have been intrigued by the fact that there now are four generations of women in the work force. Female leaders, meanwhile, are seeking ways to find their footing while managing women of different ages. That's what I learned last week at the Women Presidents' Organization conference in Chicago. It was a gathering of 500 women who run businesses with revenues of $2 million or more. One attendee was Nina McLemore, founder of Liz Claiborne Accessories, who now has her own designer-clothing line. She says today's twentysomethings were coddled as girls -- chauffeured from play date to play date -- and now want to be coddled on the job. Ms. McLemore, 60, often works until 11 p.m., but her young staffers tend to be 9-to-5ers. "They'll tell me, 'Wow. That was really late when you sent me the email last night.'" She

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 34 of 36 tries to understand the reasons behind their reluctance to work hard. "Some are less interested in putting in long hours because they've seen their mothers do it, and they don't want that stress. I've heard this from women in all industries again and again." For their part, many younger women feel that older female colleagues and bosses aren't helpful or relevant to them. Just 53% of women said they "learn from older co-workers," according to a survey released last week by Randstad USA, an employment-services firm. Only 23% of women under age 34 said older co-workers "energize me and bring new ideas to the table." This reflects the reality that many older female managers are reluctant to be mentors, says Susan Shapiro Barash, a gender-studies professor at Marymount Manhattan College. When these women were young, there were few or no female role models, and their attitude is, "I toughed it out and made it on my own. You can too," she says. In a study of 500 women conducted by Prof. Barash, 70% felt that male bosses treated them better than female bosses did. Also, 65% of the women over age 50 admitted that they'd prefer to mentor women in their 20s instead of women in their late 30s or 40s. The reason? A female baby boomer is often uncomfortable helping a woman "who might get her job next," says Prof. Barash. Her research is detailed in a new book about women and rivalry, "Tripping the Prom Queen." Some women are rethinking mentor/protégée relationships. Women born before 1945 often worked primarily out of economic necessity, and less because it was a fulfilling life choice, says Mel Fugate, a professor at Southern Methodist University's Cox School of Business, who studies generational diversity in the work force. That's why their advice doesn't always resonate with those born later. Some powerful women in their 60s say they'd love to have older female role models. But few women over age 70 ever headed companies, and their workplace experiences as, say, teachers or nurses don't translate to today's corporate world. "My mentors used to be older men," says Shirley Maddalena Edson, 62, who since 1976 has run her own interior-design firm in Birmingham, Mich. Now, hungry for feminine input, she turns to female designers in their 40s to be her role models. Mentoring between women should be informal, says Pamela Lenehan, who runs a consulting firm in Needham, Mass. "Never ask, 'Will you be my mentor?' It's like asking, 'Will you be my Valentine?'" Ms. Lenehan also advises older female leaders to find creative ways to give younger women better work/life balances. Her new book, with advice from female executives, is titled "What You Don't Know and Your Boss Won't Tell You." More seminars and workshops are focusing on the fact that diversity in the workplace isn't just about race or gender, it's also about age. Pundit Ben Stein, who spoke last week at a Randstad summit on generational diversity, advises older female bosses to quit indulging young workers. For instance, he advocates bluntly telling young employees that "it's grossly inappropriate to dress provocatively for work unless you're a stripper or a prostitute." But Ms. Brod, the PR firm owner, prefers to tread more lightly with her young, underdressed work force. What they lack in propriety, she says, "they make up in energy."

© Copyright 2006 Dow Jones & Company, Inc. All rights reserved. WSJ Professor Guide: Page 35 of 36 26. Differences between older and younger generations of women in the workplace are reflected in that a. young staffers tend to be 9-to-5ers instead of late-nighters b. many older female managers are reluctant to be mentors c. many younger women feel that older female colleagues and bosses aren't helpful or relevant d. All of the above Correct