Market Machinations | Business Economy RC Practice

What unseen forces might be driving those frustrating price hikes at your favorite stores? How does corporate concentration affect your wallet in ways traditional economic theories don’t fully explain? These high difficulty RC passages explore the complex relationship between market power and inflation, demanding careful analysis of cause-effect relationships and policy implications.

Read these challenging RC passage(s) in Business, Economy, and Governance and answer the question(s) that follows. You can choose the GMAT style Reading Passage and the question or the GRE RC variant and answer the GRE-style question. Even better, you could solve both.

GMAT RC | Hard Passage | ~220 words

Contemporary economic debates regarding inflation frequently overlook the systematic process through which concentrated market power contributes to rising prices. Initially, large corporations with dominant market positions identify sectors with limited competition, establishing price leadership that smaller entities must follow. Subsequently, these dominant firms implement synchronized price adjustments while citing external factors such as supply chain disruptions or input costs as justification. Next, corporate executives strategically frame these modifications in quarterly earnings calls as “pricing actions” rather than acknowledging their profit-maximizing intent. The fourth stage involves these enterprises documenting unprecedented financial gains concurrent with consumer cost increases—a contradiction that fundamentally undermines traditional inflation theory. Following this, industry associations deploy extensive public relations campaigns emphasizing unavoidable cost pressures rather than discretionary business decisions.

Meanwhile, economic policymakers respond by implementing monetary tightening that disproportionately impacts workers and smaller businesses while leaving corporate pricing authority largely unaddressed. Throughout this sequence, the deliberate conflation of genuine economic imbalances with strategic revenue enhancement serves to redirect public discourse away from market structure concerns. Consequently, anti-monopoly enforcement remains marginalized in discussions about controlling price levels despite compelling evidence that market concentration enables pricing behavior distinct from competitive dynamics. This procedural masking of consolidated economic power perpetuates a policy environment where revenue maximization strategies are miscategorized as broader macroeconomic pressures rather than recognized as symptoms of insufficient competition.

Question Type: Role of Sentence | Question Difficulty: Medium-High

The author points out the contradiction between record profit margins and price increases in order to:

1. Demonstrate that corporate executives deliberately misrepresent their pricing strategies to shareholders
2. Suggest that traditional economic theories about inflation are overly simplistic
3. Undermine the credibility of economic policymakers who implement monetary tightening
4. Challenge the conventional understanding of inflation’s causes and strengthen the case for market structure reform
5. Illustrate that industry associations are complicit in misleading the public about cost pressures

GRE RC Practice | Difficult Passage | ~140 words

Conventional economic doctrine posits that inflationary pressures stem from excessive monetary supply or heightened consumer demand. However, this orthodoxy fails to account for the causal relationship between market consolidation and price volatility. The proliferation of corporate amalgamation across vital sectors initially triggers a diminution of competitive restraints on pricing authority. This concentration subsequently emboldens dominant firms to implement synchronized price adjustments that exceed genuine cost increases. The resultant amplification of profit margins consequently shifts wealth from consumers to shareholders, exacerbating economic inequity. These extractive pricing practices thereafter prompt central banking authorities to deploy blunt monetary instruments that disproportionately affect labor markets while leaving corporate pricing power largely intact. This misdiagnosis ultimately yields a pernicious economic environment where working-class households bear the brunt of anti-inflationary measures while the architectural role of monopolistic behavior in price escalation remains unaddressed by regulatory frameworks.

Question Type: Vocab in Context | Question Difficulty: Medium-High

The word “pernicious” as used in the passage most nearly means:

1. Insidious
2. Poisonous
3. Deleterious
4. Benign
5. Fluctuating