Author: greenwich
Subject: GMAT RC
Posted: Fri Apr 19, 2013 4:28 pm (GMT -7)
Seventeenth-century
philosopher John Locke
stated that as much as
Line 99 percent of the value of
(5) any useful product can be
attributed to âthe effects of
labor.â For Lockeâs intellec-
tual heirs it was only a short
step to the âlabor theory of
(10) value,â whose formulators
held that 100 percent of the
value of any product is gen-
erated by labor (the human
work needed to produce
(15) goods) and that therefore the
employer who appropriates
any part of the productâs
value as profit is practicing
theft.
(20) Although human effort is
required to produce goods
for the consumer market,
effort is also invested in
making capital goods (tools,
(25) machines, etc.), which are
used to facilitate the produc-
tion of consumer goods. In
modern economies about
one-third of the total output of
(30) consumer goods is attribut-
able to the use of capital
goods. Approximately two-
thirds of the income derived
from this total output is paid
(35) out to workers as wages and
salaries, the remaining third
serving as compensation
to the owners of the capital
goods. Moreover, part
(40) of this remaining third is
received by workers who
are shareholders, pension
beneficiaries, and the like.
The labor theory of value
(45) systematically disregards
the productive contribution of
capital goods-a failing for
which Locke must bear part
of the blame.
1. The author of the passage is primarily concerned with
A. criticizing Lockeâs economic theories
B. discounting the contribution of labor in a modern economy
C. questioning the validity of the labor theory of value
D. arguing for a more equitable distribution of business profits
E. contending that employers are overcompensated for capital goods
2. Which of the following arguments would a proponent of the labor theory of value, as it is presented in the first paragraph, be most likely to use in response to the statement that âThe labor theory of value systematically disregards the productive contribution of capital goodsâ (lines 44-47)?
A. The productive contributions of workers and capital goods cannot be compared because the productive life span of capital goods is longer than that of workers.
B. The authorâs analysis of the distribution of income is misleading because only a small percentage of workers are also shareholders.
C. Capital goods are valuable only insofar as they contribute directly to the production of consumer goods.
D. The productive contribution of capital goods must be discounted because capital goods require maintenance.
E. The productive contribution of capital goods must be attributed to labor because capital goods are themselves products of labor.
Please provide explanation with your answers.
Subject: GMAT RC
Posted: Fri Apr 19, 2013 4:28 pm (GMT -7)
Seventeenth-century
philosopher John Locke
stated that as much as
Line 99 percent of the value of
(5) any useful product can be
attributed to âthe effects of
labor.â For Lockeâs intellec-
tual heirs it was only a short
step to the âlabor theory of
(10) value,â whose formulators
held that 100 percent of the
value of any product is gen-
erated by labor (the human
work needed to produce
(15) goods) and that therefore the
employer who appropriates
any part of the productâs
value as profit is practicing
theft.
(20) Although human effort is
required to produce goods
for the consumer market,
effort is also invested in
making capital goods (tools,
(25) machines, etc.), which are
used to facilitate the produc-
tion of consumer goods. In
modern economies about
one-third of the total output of
(30) consumer goods is attribut-
able to the use of capital
goods. Approximately two-
thirds of the income derived
from this total output is paid
(35) out to workers as wages and
salaries, the remaining third
serving as compensation
to the owners of the capital
goods. Moreover, part
(40) of this remaining third is
received by workers who
are shareholders, pension
beneficiaries, and the like.
The labor theory of value
(45) systematically disregards
the productive contribution of
capital goods-a failing for
which Locke must bear part
of the blame.
1. The author of the passage is primarily concerned with
A. criticizing Lockeâs economic theories
B. discounting the contribution of labor in a modern economy
C. questioning the validity of the labor theory of value
D. arguing for a more equitable distribution of business profits
E. contending that employers are overcompensated for capital goods
2. Which of the following arguments would a proponent of the labor theory of value, as it is presented in the first paragraph, be most likely to use in response to the statement that âThe labor theory of value systematically disregards the productive contribution of capital goodsâ (lines 44-47)?
A. The productive contributions of workers and capital goods cannot be compared because the productive life span of capital goods is longer than that of workers.
B. The authorâs analysis of the distribution of income is misleading because only a small percentage of workers are also shareholders.
C. Capital goods are valuable only insofar as they contribute directly to the production of consumer goods.
D. The productive contribution of capital goods must be discounted because capital goods require maintenance.
E. The productive contribution of capital goods must be attributed to labor because capital goods are themselves products of labor.
Please provide explanation with your answers.