The consolidation of industry, which so agitated a large segment

Question

The consolidation of industry, which so agitated a large segment of the public during the late 19th and early 20th century, inevitably gave rise to a countermovement – an antimonopoly or antitrust movement. The antitrust movement is easily explained and understood. It stemmed from the basic belief in an open society, a society in which there were to be no rigid or class lines, a society in which a person or a company ought to be able to rise to the extent to which one’s abilities permitted. But the consolidation of the late 19th and early 20th century threatened this open society and free competition itself.

In the 1880’s and 1890’s, in response to these threats, the antitrust movement became a political issue of importance. There was a marked division of thought as to how the so-called trust problem should be handled. One school of thought – advocated by small businessman and farmers particularly – wanted the trusts destroyed. These people believed that trusts stifled competition and equality of opportunity, and therefore should be wiped out. Many of them, it seems, wanted to get back to a simpler society and economy.

During the 1880s and 1890s, there were other people who believed that the process of business consolidation was perfectly natural and completely inevitable. Moreover, some of them argued that large-scale business was nothing to be frightened about, and that it offered the public certain potential advantages – cheaper production; lower prices, etc. These people recognized, however, that big corporations or trusts might not pass on lower prices to the public, and felt that the government should make sure that the potential benefits of size were indeed obtained by the public. This more reasonable view held that the trusts should not be destroyed, as the other school advocated, but rather regulated and controlled by the government in order to guarantee that the public interest was upheld.   1 
 1. The author would most likely support government intervention and regulation in which of the following situations:

A. A company creates a new lifesaving cancer drug that, because of patent protection, is extremely expensive and cannot be afforded by most people suffering from the disease.
B. By purchasing its major rival, a company creates a monopoly for its most important product. Consumers no longer have several options for that product, but prices have gone down.
C. Several companies who sell a similar product collude to keep prices down for that product in order to stifle a major international company that has entered the market.
D. A major electronics company has entered into an arrangement with its two main competitors to make all of their products in the same facility, resulting in cheaper production.
E. A petroleum firm has gained control of 90% of oil reserves in the country. Its strong position has allowed the country to greatly reduce domestic gas prices by undercutting international firms.

2 
 2.Which of the following is the primary purpose of the passage above?

A. To analyze the role of monopolies and trusts in the late 19th and early 20th century.
B. To suggest that one of two alternative hypotheses regarding trusts and monopolies in the late 19th and early was wrong.
C. To describe two alternative viewpoints regarding the regulation of trusts and monopolies in the late 19th and early 20th century.
D. To present a new opinion regarding government regulation and trusts in the late 19th and early 20th century.
E. To suggest that trusts and monopolies damaged the public interest during the late 19th and early 20th century.

3 
 3. In regard to the situation in the late 19th and early 20th century, the author would most likely agree with which of the following statements:

A. Large monopolies and the consolidation of business are not in the public interest.
B. Government regulation is usually beneficial to the public interest.
C. Trusts could be beneficial to the public interest.
D. Having a free and open society is essential to the public interest.
E. Trusts should be abolished to benefit the public interest.

4 
 4. Which of the following can be properly inferred about the late 19th and early 20th century from the passage above?

A. In U.S. society, people were able to freely move up depending on their abilities.
B. Competition and equality of opportunity were considered important elements of a simple economy and society.
C. Anti-trust issues were debated often in the U.S. Congress.
D. A majority of Americans believed that trusts should be destroyed.
E. Trusts were inherently bad for the U.S. economy.

dabaobao · Accepted Answer

Passage Map: 
1) Consolidation vs antimonopoly
2) Support for antimonopoly
3) Support for consolidation. 3rd view.

AdityaHongunti · Answer

These people recognized, however, that big corporations or trusts might not  pass on lower prices  to the public, and felt that the government should make sure that the potential benefits of size were indeed obtained by the public.

- "to pass on " , a company has to obtain the intended product at lower prices .ie it should be cheap to the company itself and only the can they PASS ON the lower prices... but if the company itself has spent a lot in development of the product , then why would they PASS ON lower prices ??

A) A company creates a new lifesaving cancer drug that, because of patent protection, is extremely expensive and cannot be afforded by most people suffering from the disease. - This may sound promising , but nowhere is it stated that the company produced the product at lower prices to PASS ON the lower prices ... !!! we need an assumption here...

D) A major electronics company has entered into an arrangement with its two main competitors to make all of their products in the same facility, resulting in cheaper production. -- This says that the company produced product at cheap proudction costs ... now there is a possibilty this comapny may not PASS ON the lower prices to consumers ...so govt.th intervention here may be fruitful...but even this AC needs an assumption that the comapny did not actually pass on the lower prices to consumers ,resulting in futile govt. intervention.

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A and D both seem credible ...please explain... if we strictly adhere to the context in the passage , D seems to be a better one

VeritasPrepBrian · Answer

I'd look at the fact that the question asks about when the author would most likely support intervention *and* regulation.

With D, you don't know either way whether those lower costs are being passed on, so you don't have a 100% case for intervention (if consumers are getting a better deal, then there's no need to intervene). Whereas with A we know that consumers and the "public good" (as referenced in author's most editorial statement in the last sentence) are being violated, so you do have a good case for intervention and regulation.

With A, you do know that the public good is being violated as most people with the disease cannot afford the medication. And the reason is called out as "patent protection" (and the monopoly it affords), not something like an expensive manufacturing process or raw material or something like that. So that is a company using its market power in violation of the public good.

dcummins · Answer

Question 1 - Official Explanation:

Solution: B

Explanation:

For (A), you should look in the first paragraph. One sentence reads: “It stemmed from our basic belief in an open society, a society in which there were to be no rigid or class lines, a society in which a person or a company ought to be able to rise to the extent to which one’s abilities permitted.” While it is declared that they “ought to be” able to move freely, there is no evidence given about whether people really could move freely in that time period (in fact if anything the opposite is suggested). (A) is incorrect.

For (B) you can find concrete evidence in the second paragraph: “These people believed that trusts stifled competition and equality of opportunity, and therefore should be wiped out. Many of them, it seems, wanted to get back to a simpler society and economy.” If trusts stifled competition and equality of opportunity, and in order to get to a simpler society and economy, these people wanted to wipe them out, you can definitely conclude that those two things were considered important elements.

For (C), while anti-trust issues were politically important, no evidence is given about how much they were debated.

Likewise for (D): you know that some people in America wanted to destroy the trusts, but you have no idea if it was a majority.

And for (E), there is no way to conclude whether that is true: all you know is that there were two viewpoints about what to do about trusts.

Deadpool3 · Answer

From Passage:(Excerpt)
These people recognized, however, that big corporations or trusts  might not pass on lower prices to the public , and felt that the government should  make sure that the potential benefits of size were indeed obtained by the public .

In 1st question :
The author would most likely support government intervention and regulation in which of the following situations:

A) A company creates a new lifesaving cancer drug that, because of patent protection, is extremely expensive and cannot be afforded by most people suffering from the disease. -->Patent might suggest monopoly, but it does not suggest that production prices are lower, what if it is very expensive to produce in first place, in that case there will be no use for Govt. to intervene -->This suggest we have to assume production prices are lower in first place. 
D) A major electronics company has entered into an arrangement with its two main competitors to make all of their products in the same facility, resulting in cheaper production. --> This tells us that production prices are lower but whether passed on or not is left to be assumed

Isn't both options asking as to assume something, hence both are incorrect?

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DmitryFarberMPrep · Answer

Deadpool3  Answer choice A specifies that the price is high because of patent protection. This implies that the cost of production must be low enough to leave a healthy profit. Otherwise, competitors wouldn't be able to produce the drug any cheaper and patent protection would not be the cause of the high price.

RAHUL_GMAT · Answer

For question No. 3

I think majority of people marked B in this question

Lets first understand why is C correct 
Read this
"Some of them argued that large-scale business was nothing to be frightened about, and that it offered the public certain  potential advantages – cheaper production; lower prices, etc.

So the statement C is correct

Now why is B wrong because Author seems to himself suggest that regulations are important but note that the option B makes a very  generic statement

Author says - Regulations will be good for this particular case
B Says - Regulations will be good for most of the cases in general

AaronPond · Answer

Here is the full breakdown for Question #1 in this set:

The key behind a "  Mimic  " question like this is to carefully determine the "  Big Picture  " associated with the question and then "  Nitpick  " answers, eliminating answers that don't fit. The question asks for what situation the author "   would most likely support government intervention and regulation   ."

In the last paragraph the author talks about the "   more reasonable view   " (an indication that the author agrees with this perspective.) This view argues that regulation is needed in cases when big corporations fail to pass on to the public the savings associated with economies of scale. So, our job is to find the answer that demonstrates this situation.

Answer choice  (A)  does exactly that. Patent protection creates a type of legalized monopoly, where only a specific company has the right to sell a particular product. The word "   because   " in this answer choice is crucial. It indicates a cause-effect relationship: the reason why the drug is so expensive is because of the patent protection. Thus, other hypothetical reasons for expensive drugs (such as production costs, R&D, etc.) are not relevant here. Since the drug cannot be afforded by the general public "   because   " of the patent protection, the public is not seeing the benefits of the economies of scale. It would be in the public interest to regulate this specific, monopolistic situation. Answer choice  (A)  is a perfect fit.

Answer choice  (B)  is a classic trap answer. It specifically states that a company has a "   monopoly   " for its most important product. However, the author argues that regulation is needed when the cost savings associated with monopolies are not passed on to the general public. Since  (B)  states that "   prices have gone down   ," this is not the type of monopoly that needs to be regulated. Eliminate  (B) .

Likewise,  (C)  states that collusion between companies has kept prices low for a specific product. This is in the public interest, so  (C)  can be equally eliminated.

While some people may pick  (D)  because it specifically mentions one of the benefits associated with economies of scale (namely "   cheaper production   ") while never saying that these cost savings are passed on to the public. However, not mentioning something doesn't mean it doesn't happen. (I call this trap "  Lack of Evidence is Not Evidence  " in my classes.) In order for answer choice  (D)  to describe a situation where regulation is needed, the reader must assume that the savings associated with cheaper production are retained by the companies and not passed on to the public. But we don't know this. There is no information on whether those savings are passed on or retained. With Critical Reasoning questions, correct answers should be sufficient without needing extra, unstated assumptions.

Answer choice  (E)  is very similar to  (B) . While it describes a virtual monopoly, it also mentions that the petroleum firm has used its market dominance to "   greatly reduce domestic gas prices   ." Since the general public benefits from this type of monopoly, the author would not argue that such a type of monopoly needs to be regulated.

To summarize: three of the five answer choices  (B, C, and E)  indicate that prices have gone down due to the business practices mentioned. Because this benefits the public, these answers can be easily eliminated.  (D)  requires an extra assumption not explicitly stated in the problem in order to work. This leaves only answer choice  (A)  -- a situation where there is clear monopolistic price gouging.

Answer choice (A) is the correct answer.

VerbalBot · Answer

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The consolidation of industry, which so agitated a large segment

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The consolidation of industry, which so agitated a large segment

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