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RC practice Passage with Explanation -8

In the decades following World War II, American business had undisputed control of the world economy, producing goods of such high quality and low cost that foreign corporations were unable to compete. But in the mid—1960s the United States began to lose its advantage and by the 1980s American corporations lagged behind the competition in many industries. In the computer chip industry, for example, American corporations had lost most of both domestic and foreign markets by the early 1980s.

The first analysts to examine the decline of American business blamed the U.S. government. They argued that stringent governmental restrictions on the behavior of American corporations, combined with the wholehearted support given to foreign firms by their governments, created and environment in which American products could not compete. Later analysts blamed predatory corporate raiders who bought corporations, not to make them more competitive in the face of foreign competition, but rather to sell off the most lucrative divisions for huge profits.

Still later analysts blamed the American workforce, citing labor demands and poor productivity as the reasons American corporations have been unable to compete with Japanese and European firms. Finally, a few analysts even censured American consumers for their unpatriotic purchases of foreign goods. The blame actually lies with corporate management, which has made serious errors based on misconceptions about what it takes to be successful in the marketplace. These missteps involve labor costs, production choices, and growth strategies.

Even though labor costs typically account for less than 15% of a product's total cost, management has been quick to blame the costs of workers' wages for driving up prices, making American goods uncompetitive. As a result of attempts to minimize the cost of wages, American corporations have had trouble recruiting and retaining skilled workers.

The emphasis on cost minimization has also led to another blunder: an over—concentration on high technology products. Many foreign firms began by specializing in the mass production and sale of low technology products, gaining valuable experience and earning tremendous profits. Later, these corporations were able to break into high technology markets without much trouble; they simply applied their previous manufacturing experience and ample financial resources to the production of higher quality goods. American business has consistently ignored this very sensible approach.

The recent rash of corporate mergers and acquisitions in the U.S. has not helped the situation either. While American firms have neglected long—range planning and production, preferring instead to reap fast profits through mergers and acquisitions, foreign firms have been quick to exploit opportunities to ensure their domination over future markets by investing in the streamlining and modernization of their facilities.


Suppose that labor costs were the only part of the total cost of producing goods to have risen since the mid—1960s. What is the relevance of this information to the passage?

[A] It supports the author's claim that labor demands have hurt American corporations.
[B] It supports the author's claim that workers' wages have made American goods uncompetitive.
[C] It weakens the author's claim that American corporations have had trouble retaining skilled workers.
[D] It weakens the author's claim that management was wrong to blame labor costs for driving up prices.
Option: 4
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The passage makes certain comparisons of American workers to Japanese workers. It suggests that compared to Japanese workers, American workers are often considered:

[A] more content and more efficient.
[B] more content but less efficient.
[C] less content and less efficient.
[D] less content but more efficient.
Option: 3
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With which of the following general statements would the author most likely NOT agree?

[A] American business has been hurt by the inability to plan for the long—term.
[B] Cutting production costs always leads to increased competitiveness.
[C] American consumers are not the prime cause of the decline of American business.
[D] Initial analysis of the decline of American business yielded only partially accurate conclusions.
Option: 2
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Which of the following would most weaken the author's argument about the over—concentration on high technology products?

[A] Producing low tech products is not as profitable as producing high tech products.
[B] Manufacturing high tech products is a completely different process than manufacturing low tech goods.
[C] Most of the low tech products purchased by Americans are made by foreign firms.
[D] Most of the high tech products purchased by Americans are made by foreign firms.
Option: 2
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A reader of this passage is asked to make a decision as to whether or not she stands behind the author's arguments. Adopting the author's views as presented in the passage would most likely mean acknowledging that:

[A] it should be the goal of American business to regain control of the market.
[B] the major blunder of American businesses was to alienate the skilled workers.
[C] the future of American business would appear to be hopeless.
[D] the foreign market is more important for business survival than the domestic market.
Option: 1
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The author of this passage would probably give his greatest support to which of the following actions by the corporate management of an American company?

[A] Acquiring a smaller company in order to gain financial resources
[B] Considering the option of paying the most highly skilled workers a higher wage
[C] Imitating the general management strategy of foreign firms
[D] Paying for television advertisements that will win back American consumers
Option: 3
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Economics experts have asserted that the American share of foreign and domestic markets was no greater in the 1950s than in the 1980s. If true, this would cause the author to modify the claim that:

[A] the American workforce has been unable to compete with European firms.
[B] American business squandered its advantage over foreign competition.
[C] American goods can be produced in such a way as to be competitive.
[D] the errors made by corporate management date back to the post—World War II years.
Option: 2
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