GMAT Reading Comprehension - In Any Country, the Wages Commanded by the Labourers are Determined by the Productivity

Reading Passage Question

In any country, the wages commanded by the labourers who have comparable skills but who work in various industries are determined by the productivity of the least productive unit of labour, that is, the unit of labour which works in the industry which has slightest economic disadvantages. We will represent the various opportunities of employment in a country by Symbols A, B, C, and D. A standing for a group of industries in which we have exceptional economic advantage over foreign countries; B for a group in which our advantages are less; C, one in which they are still less; D, the group of industries in which they are the least of all.

When our population is so small that all our labour can be engaged in the group represented by A, productivity of labour and (therefore wages) will be at their maximum. When our population increases so that some of the labour will have to work in group B, the wages of all labour must decline to the level of productivity in that group. But no employer, without government aid, will yet be able to afford to hire labour to exploit the opportunities, represented by C and D, unless there is a further increase in population.

But suppose that the political party in power holds the belief that we should produce everything that we consume, that the opportunities represented by C and D should also be exploited. The commodities that the industries composing D will produce have been hitherto obtained from abroad in exchange for commodities produce by A and B. The government now renders this difficult by imposing high duties upon the former class of commodities. This means that workers in A and B must pay higher prices for what they buy, but do not receive higher prices for what they sell.

“In any country, the wages commanded by the labourers are determined by the productivity GMAT reading comprehension.”- is a GMAT reading comprehension passage with answers. Candidates need a strong knowledge of English GMAT reading comprehension.

This GMAT Reading Comprehension consists of 4 comprehension questions. The GMAT Reading Comprehension questions are designed for the purpose of testing candidates’ abilities in understanding, analyzing, and applying information or concepts. Candidates can actively prepare with the help of GMAT Reading Comprehension Practice Questions.

Solution and Explanation

1. The author of the passage would most likely agree with which of the following?

(A) Population increases always result in lower wages.
(B) To operate in an industry in which economic advantages are very low, a company will require some external incentive.
(C) The political party in power has a major say in determining the wage rates in an industry.
(D) Charging high duties on imported products is one way of regulating domestic wages.
(E) A country with a smaller population will have a higher average wage rate than a country with a larger population.

2. According to the information in the passage, which of the following could be the impact of the government’s actions with reference to which economic opportunities to exploit?

(A) The prices of imported products could fall.
(B) The prices of exported products could fall.
(C) Certain groups of workers could be negatively impacted.
(D) The requirements for government aid by industries could go up drastically.
(E) The domestic wage rates could increase.

3. The wages for the workers will be highest when which group(s) would dominate?

1. Group A
2. Group B
3. Group C
4. Group D

(A) Only I
(B) Only II
(C) I, II & III
(D) III & IV
(E) All the groups

4. The main idea of the passage is:

(A) To outline the role of the government in the economy
(B) To analyze the effect population has on wages
(C) To criticize the foreign policies of the government
(D) To point out loopholes in wage determination
(E) To examine industry-wise division of workers

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