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# Most economists in the United States seem captivated by the

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30 Jul 2010, 12:52
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Most economists in the United States seem captivated by the spell of the free market. Consequently, nothing seems good or normal that does not accord with the requirements of the free market. A price that is determined by the seller or, for that matter, established by anyone other than the aggregate of consumers seems pernicious. Accordingly, it requires a major act of will to think of price-fixing (the determination of prices by the seller) as both “normal” and having a valuable economic function. In fact, price-fixing is normal in all industrialized societies because the industrial system itself provides, as an effortless consequence of its own development, the price-fixing 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 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 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 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 interference 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 by cartel and informal price-fixing by agreements covering the members of an industry are commonplace. Were there something peculiarly efficient about the free market and inefficient about price-fixing, the countries that have avoided the first and used the second would have suffered drastically in their economic development. There is no indication that they have.
Socialist industry also works within a framework of controlled prices. In the early 1970’s, 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. 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.

3. The author’s attitude toward “Most economists in the United States”(line 1) can best be described as
(A) spiteful and envious
(B) scornful and denunciatory
(C) critical and condescending
(D) ambivalent but deferential
(E) uncertain but interested
4. 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
8. 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.
..............................
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Re: RC- Free market - RC1000 - Real toughie [#permalink]

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31 Jul 2010, 03:09
c d b
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Re: RC- Free market - RC1000 - Real toughie [#permalink]

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31 Jul 2010, 05:45
gauravnagpal wrote:
c d b

Btw you got the last 2 wrong

Last edited by goalsnr on 01 Aug 2010, 05:31, edited 1 time in total.
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Re: RC- Free market - RC1000 - Real toughie [#permalink]

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31 Jul 2010, 08:41
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3) c.
4) E. => "A price that is determined by the seller or, for that matter, established by anyone other than the aggregate of consumers seems pernicious" in the first paragraph
8) b => "Modern industrial planning requires and rewards great size."

What is the OA?
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Re: RC- Free market - RC1000 - Real toughie [#permalink]

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31 Jul 2010, 21:04
C,C,A IMO
Not too sure about the last one. Just guessed it.
OA?
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Re: RC- Free market - RC1000 - Real toughie [#permalink]

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01 Aug 2010, 05:33
bibha wrote:
C,C,A IMO
Not too sure about the last one. Just guessed it.
OA?

What is the reasoning behind the answer choices?
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Re: RC- Free market - RC1000 - Real toughie [#permalink]

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01 Aug 2010, 06:29
2. A price that is determined by the seller or, for that matter, established by anyone other than the aggregate of consumers seems pernicious.
This means that price should be determined by the consumer group.

3.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
As i said, that was a guess....i don't have any reason...Just saw the word "demand" haha
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Re: RC- Free market - RC1000 - Real toughie [#permalink]

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01 Aug 2010, 17:33
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C,C,B
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Re: Most economists in the United States seem captivated by the [#permalink]

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22 Feb 2013, 07:37
3 : either B or C ( I chose B ) . Wanted to match Pernicious . wasn't sure how condescendin does that.

4 : C
Satement says
A price that is determined by the seller or, for that matter, established by anyone other than the aggregate (group) of consumers seems pernicious.

E is close but C ooked better

8.

C (POE)

Eliminate
A - talks @ Demand
B - talks @ Profit
D and E not inferable.
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Re: Most economists in the United States seem captivated by the [#permalink]

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24 Feb 2013, 01:49
smayekar wrote:
3 : either B or C ( I chose B ) . Wanted to match Pernicious . wasn't sure how condescendin does that.

4 : C
Satement says
A price that is determined by the seller or, for that matter, established by anyone other than the aggregate (group) of consumers seems pernicious.

E is close but C ooked better

8.

C (POE)

Eliminate
A - talks @ Demand
B - talks @ Profit
D and E not inferable.

Agree ... C C C (No reason for the last one ... other options were worse)
... OAs?
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Re: Most economists in the United States seem captivated by the [#permalink]

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07 Oct 2013, 08:12
3. The author’s attitude toward “Most economists in the United States”(line 1) can best be described as
(A) spiteful and envious
(B) scornful and denunciatory
(C) critical and condescending
(D) ambivalent but deferential
(E) uncertain but interested
4. 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
8. 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.

I have OAs for this passage:

3.C
4.C
8.A
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Re: Most economists in the United States seem captivated by the   [#permalink] 07 Oct 2013, 08:12
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