Q1:
2026
VA > Reading Comprehension
Hard
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 behaviour of American corporations, combined with the wholehearted support given to foreign firms by their governments, created an 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 labour 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 labour costs, production choices, and growth strategies.
Even though labour 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 modernisation of their facilities.
Suppose that labour 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?
Correct Answer
Option 4
Correct Answer