Joined: 11 May 2010
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There is widespread belief that the emergence of giant [#permalink]
25 Aug 2010, 07:56
There is widespread belief that the emergence of giant industries has been accompanied by an equivalent surge in industrial research. A recent study of important inventions made since the turn of the century reveals that more than half were the product of individual inventors working alone, independent of organized industrial research. While industrial laboratories contributed such important products as nylon and transistors, independent inventors developed air conditioning, the automatic transmission, the jet engine, the helicopter, insulin, and streptomycin. Still other inventions, such as stainless steel, television, silicones, and Plexiglas were developed through the combined efforts of individuals and laboratory teams.
Despite these finding, we are urged to support monopolistic power on the grounds that such power creates an environment supportive of innovation. We are told that the independent inventor, along with the small firm, cannot afford to undertake the important research needed to improve our standard of living while protecting our diminishing resources; that only the giant corporation or conglomerate, with its prodigious assets, can afford the kind of expenditures that produce the technological advances vital to economic progress. But when we examine expenditures for research, we find that of the more than $35 billion spent each year in this country, almost two-thirds is spent by the federal government. More than half of this government expenditure is funneled into military research and product development, accounting for the enormous increase in spending in such industries as nuclear energy, aircraft, missiles, and electronics. There are those who consider it questionable that these defense-linked research projects will either improve our standard of living or do much to protect our diminishing resources.
Recent history has demonstrated that we may have to alter our longstanding conception of the process actuated by competition. The price variable, once perceived as the dominant aspect of the process, is now subordinate to the competition of the new product, the new business structure, and the new technology. While it can be assumed that in a highly competitive industry not dominated by single corporation, investment in innovation—a risky and expensive budget item—might meet resistance from management and stockholders concerned about cost-cutting, efficient organization, and large advertising budgets, it would be an egregious error to equate the monopolistic producer with bountiful expenditures on research. Large-scale enterprises tend to operate more comfortably in stable and secure circumstances, and their managerial bureaucracies tend to promote the status quo and resist the threat implicit in change. Moreover, in some cases, industrial giants faced with little or no competition seek to avoid the capital loss resulting from obsolescence by deliberately obstructing technological progress. By contrast, small firms undeterred by large investments in plant and capital equipment often aggressively pursue new techniques and new products, investing in innovation in order to expand their market shares.
The conglomerates are not, however, completely except from strong competitive pressures. There are instances in which they too must compete with another industrial Goliath, and then their weapons may include large expenditures for innovation.
1. The primary purpose of the passage is to
(A) advocate an increase in government support of organized industrial research
(B) point out a common misconception about the relationship between the extent of industrial research and the growth of monopolistic power in industry
(C) describe the inadequacies of small firms in dealing with the important matter of research and innovation
(D) show that America’s strength depends upon individual ingenuity and resourcefulness
(E) encourage free-market competition among industrial giants
2. According to the passage, important inventions of the twentieth century
(A) were produced largely as a result of governmental support for military weapons research and development
(B) came primarily from the huge laboratories of monopolistic industries
(C) were produced at least as frequently by independent inventors as by research teams
(D) have greater impact on smaller firms than on conglomerates
(E) sometimes adversely affect our standard of living and diminish our natural resources
3. Which of the following best describes the organization of the second paragraph of the passage?
(A) Expenditures for various aspects of research are listed.
(B) Reasons for supporting monopolistic power are given and then questioned.
(C) Arguments are presented for minimizing competitive bidding for research.
(D) Resources necessary for research are defined.
(E) Costs for varied aspects of military research are questioned.
4. It can be inferred from the passage that the author
(A) has little confidence in the ability of monopolistic industry to produce the important inventions of the future
(B) would rather see the federal government spend money on social services than on the defense establishment
(C) favors a conservative approach to innovation and places trust in conglomerates to provide efficient production
(D) feels that price should still be the dominant variable in the competitive process
(E) believes that excessive competition is a deterrent to innovation
5. The passage contains information that answers which of the following questions?
I. What portion of the research dollar in this country is spent each year by the federal government?
II. Under what circumstances is an industrial giant likely to invest heavily in innovation?
III. Why might a monopolistic producer want to suppress an innovation?
(A) I only
(B) II only
(C) I and II only
(D) II and III only
(E) I, II, and III
6. With which of the following statements would the author of the passage be most likely to agree?
(A) Monopolistic power creates an environment supportive of innovation.
(B) Governmental expenditure for military research will do much to protect our dwindling resources.
(C) Industrial giants, with their managerial bureaucracies, respond more quickly to technological change than smaller firms do.
(D) Firms with a small share of the market aggressively pursue innovations because they are not locked into old capital equipment.
(E) The independent inventor cannot afford to undertake the research needed to improve our standard of living.
7. Which of the following proposals best responds to the issues raised by the author?
(A) Governmental restraints on monopolies should be lifted, and government funding should be made available to large corporations wishing to engage in research.
(B) Governmental restraints on monopolies should be tightened, and government funding should be made available to small corporations and independent individuals wishing to engage in research.
(C) Governmental restraints on monopolies should be tightened, and no government funding should be provided to any corporations or individuals wishing to engage in research.
(D) The amount the government spends on military research should be decreased, and the amount it spends to improved the standard of living should be increased.
(E) Governmental restraints on monopolies should be lifted, and no government funding should be provided to any corporations or individuals wishing to engage in research.
8. Which of the following, if true, would most weaken the author’s main point?
(A) In the last decade, conglomerates have significantly increased their research budgets for defense technology.
(B) Tax restructuring permits smaller firms to write off a larger percentage of profits against research.
(C) A ten-year study of the extent of resources devoted to research by smaller enterprises reveals a steady decline.
(D) Military research is being directed more extensively to space technology than to short-range missiles.
(E) Competition from foreign industries has increased the cost of labor and materials.
OA: BCBA EDBC
Can some one explain how you got number 4 and 8?