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. 1 E 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 A 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 non-socialist industrialized societies? (A) I only (B) III only (C) I and II only (D) II and III only (E) I, II, and III 3 C 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 C 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 B 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 non-industrialized societies (E) a phenomenon best achieved cooperatively by government and industry 6 E 6. According to the author, price-fixing in non-socialist countries is often (A) accidental but productive (B) illegal but useful (C) legal and innovative (D) traditional and rigid (E) intentional and widespread 7 D 7. According to the author, what is the result of the Soviet Union’s change in economic policy in the 1970’s? (A) Soviet firms show greater profit. (B) Soviet firms have less control over the free market. (C) Soviet firms are able to adjust to technological advances. (D) Soviet firms have some authority to fix prices. (E) Soviet firms are more responsive to the free market. 8 A 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. 9 B 9. 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

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psls

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Hi GMATNinja or others are welcome!

Can anyone explain more about Q8 answer(A)

I read entire forum but cannot still get it.
How can we infer this answer from passage?

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.

Thanks!

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13 May 2021, 22:00

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TorGmatGod

Hey TorGmatGod, I'm a quoting a line from the passage that might help with the answer -

" 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"

^the line tells us that large firms formulate certain strategies to maintain a stable demand and hence, we can say that there is a good chance that the firms would anticipate demand or make some reasonable predictions around it or at least study it in detail. If a firm is formulating it's pricing strategy around demand, of course, the firm would anticipate it.

Of course, all of what I wrote in the paragraph above does not have to be true and that is where the language of the question comes into play. Remember, we are asked "With which of the following statements would the author be most likely to agree?". We are not looking for an airtight statement that can absolutely be inferred from the passage. This is just something that the author is most likely to agree with out of the 5 options. It does not mean that the author will end up agreeing with the correct option, just that there is highly likelihood of him/her doing so.

I'm no expert, but hope this helps!

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TorGmatGod

I have the same question as you have. By the way, I have tried POE when doing this question and, I thought, it works well

Starting with the passage about Industrialised socities

Quote:

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.

Ok, let's try POE;

Quote:

(A) The directors of large firms will continue to anticipate the demand for products.

there is something about demand here price-cutting would be prejudicial to the common interest in a stable demand for products. Keep this option.

Quote:

(B) The directors of large firms are less interested in achieving a predictable level of profit than in achieving a large profit.

there is something quite similar Modern industrial planning requires and rewards great size but this cannot infer anything about a predictable level of profit. So eliminate this.

Quote:

Nothing about the cost at all. So eliminate this.

Quote:

(D) Many directors of large firms believe that the government should establish the prices that will be charged for products.

Nothing about government at all. So eliminate this.

Quote:

(E) Many directors of large firms believe that the price charged for products is likely to increase annually.

It is contradict to avoid selling its products for more than its competitors charge. so eliminate this.

I hope this help! but I am also waiting for expert to help to validate my logic.

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Hey experts,

GMATNinja KarishmaB ExpertsGlobal5

Could you please explain why option A is incorrect in question 1. In first line it is mentioned that most economists are captivated by free market, but few lines later author criticises it.

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waytowharton

The entire passage talks about why price fixing by the seller works. It doesn't refute that free market plays a useful role. It only says that even though price fixing is against the free market tenet, it is still useful to the economy.

Notice the beginning of the passage:

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 passage starts with the mention of free market and that price fixing seems unacceptable to economists because it is against the free market ideology. Then the passage says that that is why to think of price fixing as useful needs a lot of effort. Then he goes on to say that price fixing is indeed useful and normal because ... and thus continues the rest of the passage.

The point of the passage is that price fixing is normal and useful.

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Question 1

waytowharton

Question 1 asks us to find the author's primary purpose. Here's (A):

Quote:

(A) refute the theory that the free market plays a useful role in the development of industrialized societies

You're right that the author criticizes economists who "seem captivated by the spell of the free market." But that's way different than saying that the free market doesn't play a useful role at all.

The author just thinks that these economists are so blinded by love of the free market that they miss the importance of price-fixing. He/she never argues that the free market isn't also important -- instead, he/she just says that price-fixing is a component overlooked by these economists.

So, it's not quite right to say that the author refutes the useful role of the free market. Eliminate (A) for question 1.

I hope that helps!

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Updated on: 13 Aug 2022, 22:04

Originally posted by Rickooreo on 13 Aug 2022, 21:55.
Last edited by Rickooreo on 13 Aug 2022, 22:04, edited 3 times in total.

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GMATNinja
KarishmaB
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EMPOWERgmatVerbal RonTargetTestPrep TommyWallach and all GMAT expert

This passage is big and I got confused in what passage is trying to say at one point. If the same happens in exam, what should I do?
For instance, in paragraph 2
"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."

Here is some change of opinion without any background: 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.

I tend to re-read quite frequently while solving verbal questions

I read random articles and I understood sentences quite easily without the need to re-read. (source of article : The Economist).
So I think THE SOLE REASON for this re-reading is the pressure I am in while solving the question.

Now, there will be (atleast for me) a huge difference in degree of pressure while solving question in the exam than solving questions in the the mock or from question bank. In exam, I will not be confident as to whether I have understood the sentence properly + being in the pressure will make it difficult to focus on what the sentence is trying to say

Practicing question in timed fashion doesn't seem to be the solution because the kind of pressure will be different. What do you suggest I should be doing . Also, the way I should practise question so that I can handle the exam situation.

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Rickooreo

The more you obsess about it, the worse it is going to get. We know that if we do not get our target score in the actual exam, we can cancel it and no one will be the wiser. That should give you some re-assurance in the actual test. It is not a make or break situation, so take a deep breath and do your best. Meanwhile, practice under timed conditions and if required, give yourself even less time than is available on the actual test.

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This passage is complete garbage. I can see why you had to re-read it a bunch of times—it's so horribly written that it's practically unintelligible.
I don't know where this passage came from, but it's definitely not official. (GMAC's passages are tightly organized and VERY well written.) Please ignore it.

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19 Aug 2022, 09:49

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Got all Right !!!!!!!!!!!!!!!!1

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For question 2, is the support in the passage here for Choice A?
--> "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."

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12 Dec 2022, 06:21

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woohoo921

Read the official explanation in the post in the link below.

https://gmatclub.com/forum/most-economi ... l#p2167057

Best.

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Sajjad1994

woohoo921

Read the official explanation in the post in the link below.

https://gmatclub.com/forum/most-economi ... l#p2167057

Best.

Sajjad1994
I appreciate your reply, but the reason why I requested an expert response was because I was still seeking clarity after reading the thread. The post you redirected me to was vague, thus for my follow-up question.

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Question 2

woohoo921

Here's question 2:

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?

The author discusses several methods of price fixing. The first one, as you've mentioned, is discussed in the second half of the first paragraph.

Additionally, the author mentions that "formal price-fixing by cartel and informal price-fixing by agreements covering the members of an industry are commonplace" in non-socialist countries outside of the US.

Both of these sections provide some ways for prices to be fixed, so (A) is the correct answer.

I hope that helps!

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I was confused with question 2. I thought it was III statement only but that is not true.

This is not really true while this may seems so in the first go.

See this - price-fixing is normal in all industrialized societies, author himself hasn’t mentioned it explicitly that the socialist industries are more common to have the price-fixing. Even in the last passage, author say "Socialist industry also works within a framework of controlled prices", which is more of an example per say.

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Can somebody please provide the summary of this passage

1 2

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