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Most economists in the united States seem captivated

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CEO
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Most economists in the united States seem captivated [#permalink] New post 24 Apr 2004, 04:08
Most economists in the united States seem
captivated by the spell of the free market. Conse-
quently, nothing seems good or normal that does
not accord with the requirements of the free market.
(5) A price that is determined by the seller or, for
that matter, established by anyone other than the
aggregate of consumers seems pernicious. Accord-
ingly, it requires a major act of will to think of
price-fixing (the determination of prices by the
(10) seller) as both "normal" and having a valuable
economic function. In fact, price-fixing is normal
in all industrialized societies because the indus-
trial system itself provides, as an effortless conse-
quence of its own development, the price-fixing
(15) that it requires. Modern industrial planning
requires and rewards great size. Hence,
a comparatively small number of large firms will
be competing for the same group of consumers.
That each large firm will act with consideration of
(20) its own needs and thus avoid selling its products
for more than its competitors charge is commonly
recognized by advocates of free-market economic
theories. But each large firm will also act with
full consideration of the needs that it has in
(25) common with the other large firms competing for
the same customers. Each large firm will thus
avoid significant price-cutting, because price-
cutting would be prejudicial to the common interest
in a stable demand for products. Most economists
(30) do not see price-fixing when it occurs because
they expect it to be brought about by a number of
explicit agreements among large firms; it is not.
Moreover, those economists who argue that
allowing the free market to operate without inter-
(35) ference is the most efficient method of establishing
prices have not considered the economies of non-
socialist countries other than the United states.
These economies employ intentional price-fixing,
usually in an overt fashion. Formal price-fixing
(40) by cartel and informal price-fixing by agreements
covering the members of an industry are common-
place. Were there something peculiarly efficient
about the free market and inefficient about price-
fixing, the countries that have avoided the first
(45) and used the second would have suffered drastically
in their economic development. There is no indica-
tion that they have.
Socialist industry also works within a frame-
work of controlled prices. In the early 1970's,
(50) the Soviet Union began to give firms and industries
some of the flexibility in adjusting prices that a
more informal evolution has accorded the capitalist
system. Economists in the United States have
hailed the change as a return to the free market.
(55) But Soviet firms are no more subject to prices
established by a free market over which they
exercise little influence than are capitalist firms;
rather, Soviet firms have been given the power to
fix prices.

1. The primary purpose of the passage is to
(A) refute the theory that the free market plays a
useful role in the development of industrialized
societies
(B) suggest methods by which economists and members
of the government of the United States can
recognize and combat price-fixing by large firms
(C) show that in industrialized societies price-fixing and
the operation of the free market are not only
compatible but also mutually beneficial
(D) explain the various ways in which industrialized
societies can fix prices in order to stabilize the free
market
(E) argue that price-fixing, in one form or another, is an
inevitable part of and benefit to the economy of any
industrialized society

2. The passage provides information that would answer
which of the following questions about price-fixing?
Ⅰ.What are some of the ways in which prices can be
fixed?
Ⅱ. For what products is price-fixing likely to be more
profitable that the operation of the free market?
Ⅲ.Is price-fixing more common in socialist
industrialized societies or in nonsocialist
industrialized societies?
(A) Ⅰonly
(B) Ⅲ only
(C) Ⅰand Ⅱonly
(D) Ⅱand Ⅲ only
(E) Ⅰ,Ⅱ,and Ⅲ

3. It can be inferred from the author's argument that a
price fixed by the seller "seems pernicious"(line 7)
because
(A) people do not have confidence in large firms
(B) people do not expect the government to
regulate prices
(C) most economists believe that consumers as a
group should determine prices
(D) most economists associate fixed prices with
communist and socialist economies
(E) most economists believe that no one group
should determine prices

4. The suggestion in the passage that price-fixing in
industrialized societies is normal arises from the
author's statement that price-fixing is
(A) a profitable result of economic development
(B) an inevitable result of the industrial system
(C) the result of a number of carefully organized
decisions
(D) a phenomenon common to industrialized and
nonindustrialized societies
(E) a phenomenon best achieved cooperatively by
government and industry

5. With which of the following statements regarding the
behavior of large firms in industrialized societies
would the author be most likely to agree?
(A) The directors of large firms will continue to
anticipate the demand for products
(B) The directors of large firms are less interested in
achieving a predictable level of profit than in
achieving a large profit.
(C) The directors of large firms will strive to reduce the
costs of their products
(D) Many directors of large firms believe that the
government should establish the prices that will be
charged for products
(E) Many directors of large firms believe that the price
charged for products is likely to increase annually.

6. In the passage, the author is primarily concerned with
(A) predicting the consequences of a practice
(B) criticizing a point of view
(C) calling attention to recent discoveries
(D) proposing a topic for research
(E) summarizing conflicting opinions
CEO
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Kudos [?]: 657 [0], given: 781

 [#permalink] New post 25 Apr 2004, 12:59
anyone want to try?
Senior Manager
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GMAT Tests User
 [#permalink] New post 25 Apr 2004, 21:02
time more than 10 mins
(1) A
(2) A
(3) C
(4) B
(5) C
(6) B

please post OA, Praetorian



Dharmin
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Posts: 295
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GMAT Tests User
 [#permalink] New post 26 Apr 2004, 05:07
1) E
2) A
3) C
4) B
5) A
6) B

about 9 mins.
CEO
CEO
avatar
Joined: 15 Aug 2003
Posts: 3470
Followers: 59

Kudos [?]: 657 [0], given: 781

Re: [#10] RC Challenge: Economists [#permalink] New post 28 Apr 2004, 18:44
Quote:
1. Time yourself
2. Solve as fast as you can
3. Please explain your answers and mention the time taken.

Most economists in the united States seem
captivated by the spell of the free market. Conse-
quently, nothing seems good or normal that does
not accord with the requirements of the free market.
(5) A price that is determined by the seller or, for
that matter, established by anyone other than the
aggregate of consumers seems pernicious. Accord-
ingly, it requires a major act of will to think of
price-fixing (the determination of prices by the
(10) seller) as both "normal" and having a valuable
economic function. In fact, price-fixing is normal
in all industrialized societies because the indus-
trial system itself provides, as an effortless conse-
quence of its own development, the price-fixing
(15) that it requires. Modern industrial planning
requires and rewards great size. Hence,
a comparatively small number of large firms will
be competing for the same group of consumers.
That each large firm will act with consideration of
(20) its own needs and thus avoid selling its products
for more than its competitors charge is commonly
recognized by advocates of free-market economic
theories. But each large firm will also act with
full consideration of the needs that it has in
(25) common with the other large firms competing for
the same customers. Each large firm will thus
avoid significant price-cutting, because price-
cutting would be prejudicial to the common interest
in a stable demand for products. Most economists
(30) do not see price-fixing when it occurs because
they expect it to be brought about by a number of
explicit agreements among large firms; it is not.
Moreover, those economists who argue that
allowing the free market to operate without inter-
(35) ference is the most efficient method of establishing
prices have not considered the economies of non-
socialist countries other than the United states.
These economies employ intentional price-fixing,
usually in an overt fashion. Formal price-fixing
(40) by cartel and informal price-fixing by agreements
covering the members of an industry are common-
place. Were there something peculiarly efficient
about the free market and inefficient about price-
fixing, the countries that have avoided the first
(45) and used the second would have suffered drastically
in their economic development. There is no indica-
tion that they have.
Socialist industry also works within a frame-
work of controlled prices. In the early 1970's,
(50) the Soviet Union began to give firms and industries
some of the flexibility in adjusting prices that a
more informal evolution has accorded the capitalist
system. Economists in the United States have
hailed the change as a return to the free market.
(55) But Soviet firms are no more subject to prices
established by a free market over which they
exercise little influence than are capitalist firms;
rather, Soviet firms have been given the power to
fix prices.


Quote:
1. The primary purpose of the passage is to

(A) refute the theory that the free market plays a
useful role in the development of industrialized
societies
(B) suggest methods by which economists and members
of the government of the United States can
recognize and combat price-fixing by large firms
(C) show that in industrialized societies price-fixing and
the operation of the free market are not only
compatible but also mutually beneficial
(D) explain the various ways in which industrialized
societies can fix prices in order to stabilize the free
market
(E) argue that price-fixing, in one form or another, is an
inevitable part of and benefit to the economy of any
industrialized society


Answer: E

Quote:
2. The passage provides information that would answer
which of the following questions about price-fixing?
Ⅰ.What are some of the ways in which prices can be
fixed?
Ⅱ. For what products is price-fixing likely to be more
profitable that the operation of the free market?
Ⅲ.Is price-fixing more common in socialist
industrialized societies or in nonsocialist
industrialized societies?
(A) Ⅰonly
(B) Ⅲ only
(C) Ⅰand Ⅱonly
(D) Ⅱand Ⅲ only
(E) Ⅰ,Ⅱ,and Ⅲ


Answer: A

Quote:
3. It can be inferred from the author's argument that a
price fixed by the seller "seems pernicious"(line 7)
because
(A) people do not have confidence in large firms
(B) people do not expect the government to
regulate prices
(C) most economists believe that consumers as a
group should determine prices
(D) most economists associate fixed prices with
communist and socialist economies
(E) most economists believe that no one group
should determine prices


Answer: C

Quote:
4. The suggestion in the passage that price-fixing in
industrialized societies is normal arises from the
author's statement that price-fixing is
(A) a profitable result of economic development
(B) an inevitable result of the industrial system
(C) the result of a number of carefully organized
decisions
(D) a phenomenon common to industrialized and
nonindustrialized societies
(E) a phenomenon best achieved cooperatively by
government and industry


Answer: B

Quote:
5. With which of the following statements regarding the
behavior of large firms in industrialized societies
would the author be most likely to agree?
(A) The directors of large firms will continue to
anticipate the demand for products
(B) The directors of large firms are less interested in
achieving a predictable level of profit than in
achieving a large profit.
(C) The directors of large firms will strive to reduce the
costs of their products
(D) Many directors of large firms believe that the
government should establish the prices that will be
charged for products
(E) Many directors of large firms believe that the price
charged for products is likely to increase annually.


Answer: A

Quote:
6. In the passage, the author is primarily concerned with
(A) predicting the consequences of a practice
(B) criticizing a point of view
(C) calling attention to recent discoveries
(D) proposing a topic for research
(E) summarizing conflicting opinions

Answers: B
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GMAT Tests User
 [#permalink] New post 29 Apr 2004, 14:14
6 minutes

I got 2 wrong in this.

Q5 I read completely wrong. What a mistake.

For Q2 I though the passage has information about

What are some of the ways in which prices can be
fixed?
Is price-fixing more common in socialist
industrialized societies or in nonsocialist
industrialized societies?

Because any control given to the industries in USSR was hailed by economists infering that price fixing is common in socialist economies(by government )
Intern
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Joined: 06 Jan 2004
Posts: 5
Location: Huntington Beach, CA
Followers: 0

Kudos [?]: 0 [0], given: 0

 [#permalink] New post 07 May 2004, 17:23
14 minutes.

I got 2 wrong. Q1 and Q6. These are the typical types of questions I get wrong. Bummer. I'm not sure what to do differently.
  [#permalink] 07 May 2004, 17:23
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