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Passage 9 Most economists in the united States seem [#permalink]
11 Sep 2011, 22:17
Passage 9 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. 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
5. 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
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