GRE Verbal Reasoning Questions

Reading Comprehension Questions (Set 2)

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Questions 1 to 9 below are based on this passage:

"Most economists in the United states seem captivated by spell of the free market. Consequently, nothing seems good ornormal 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 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-markets economic theories. But each large firms 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. More over 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 common place. 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 frame work of controlled prices. In 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 free market over which they exercise little influenced than are capitalist firms.

 Answer Sheet of Set 2
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 Check Answer:
1. The primary purpose of the passage is to

ExerciseRefute the theory that the free market plays a useful role in the development of industrialized societies.

ExerciseSuggest methods by which economist and members of the government of the United States can recognize and combat price-fixing by large firms.

ExerciseExplain the various ways in which industrialized societies can fix in order to stabilized the free market

ExerciseArgue that price-fixing, in one form or another, is an inevitable part of and benefit to the economy of any industrialized society.

ExerciseAnalysis of free markets in different economies

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 than the operation of the free market?
III.Is price-fixing more common in socialist industrialized societies or in nonsocialist industrialized societies?

ExerciseI only

ExerciseIII only

ExerciseI and II only

ExerciseII and III only

ExerciseI, II and III

3. The author’s attitude toward “Most economists in the United States” can best be described as

Exercisespiteful and envious

Exercisescornful and denunciatory

Exercisecritical and condescending

Exerciseambivalent but deferential

Exerciseuncertain but interested

4. It can be inferred from the author’s argument that a price fixed by the seller “seems pernicious” because

Exercisepeople do not have confidence in large firms

Exercisepeople do not expect the government to regulate prices

Exercisemost economists believe that consumers as a group should determine prices.

Exercisemost economists associate fixed prices with communist and socialist economies.

ExerciseMost 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

Exercisea profitable result of economic development

Exercisean inevitable result of the industrial system

Exercisethe result of a number of carefully organized decisions.

Exercisea phenomenon common to industrialized and to industrialized societies.

Exercisea phenomenon best achieved cooperatively by government and industry.

6. According to the author, priced-fixing in nonsocialist countries is often.

Exerciseaccidental but productive

Exerciseillegal but useful

Exerciselegal and innovative

Exercisetraditional and rigid

Exerciseintentional and widespread.

7. According to the author, what is the result of the Soviet Union’s change in economic policy in the 1970’s?

ExerciseSoviet firms show greater profit

ExerciseSoviet firms have less control over the free market

ExerciseSoviet firms are able to abject to technological advances.

ExerciseSoviet firms have some authority to fix prices.

ExerciseSoviet firms are more responsive to the free market.

8. With which of the following statements regarding the behavior of large firms in industrialized societies would the author be most likely to agree.

ExerciseThe directors of large firms will continue to anticipate the demand for products

ExerciseThe directors of large firms are less interested in achieving a predictable level of profit tan in achieving a large profit.

ExerciseThe directors of large firms will strive to reduce the costs of their products.

ExerciseMany directors of large firms believe that the government should establish the prices that will be charged for products.

ExerciseMany directors of large firms believe that the price charged for products is likely to increase annually.

9. In the passage, the author is primarily concerned with

Exercisepredicting the consequences of a practice

Exercisecriticizing a point of view

Exercisecalling attention to recent discoveries.

Exerciseproposing a topic for research.

Exercisesummarizing conflicting opinions.