Be a good reader! Now, get ready to comprehend the following better to give the answers to the questions which follow the Passage within a limited time frame:

Globalization, liberalization, and free-market are some of the most significant modern trends in the economy. Most economists in our country seem captivated by the spell 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 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 an effortless consequence of the 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 will 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 arguer that allowing the free-market to operate without interference is the most efficient method of establishing prices has not considered the economics of non-socialist countries. Most of 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 1970s the Soviet Union began to give firms and industries some flexibility in adjusting prices that a more informal evolution has accorded the capitalist system. Economists in the USA have hailed the change as a return to the free market. But the then Soviet firms were not in favour of the prices established by a free- market over which they exercise little influence; rather, Soviet firms acquired some power to fix prices.

1.       What is the primary objective of the author to write the passage?

2.       How is the information in the passage helpful?

3.       Considering the literal meaning and connotations of the words used in the passage, how can the author’s attitude towards ‘most economists’ be described?

4.       What was the result of the then Soviet Union’s change in its economic policy in the 1970s?

5.       Why does the author feel that the price fixed by the seller seems pernicious?