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PREP2012-Pack1-RC-001
Themodernmultinationalcorporationisdescribedashavingoriginatedwhenthe
owner-managersofnineteenth-centuryBritishfirmscarryingoninternationaltradewerereplacedbyteamsofsalariedmanagersorganizedintohierarchies.Increasesinthevolumeoftransactionsinsuchfirmsarecommonlybelievedtohavenecessitatedthisstructuralchange.Nineteenth-centuryinventionsthesteamshipandthetelegraph,byfacilitatingcoordinationofmanagerialactivities,aredescribedaskeyfactors.Sixteenth-andseventeenth-centurycharteredtradingcompanies,despitetheinternationalscopeoftheiractivities,areusuallyconsideredirrelevanttothisdiscussion:thevolumeoftheirtransactionsisassumedtohavebeentoolowandthecommunicationsandtransportoftheir
daytooprimitivetomakecomparisonswithmodernmultinationalsinteresting.
Inreality,however,earlytradingcompaniessuccessfullypurchasedandoutfittedships,builtandoperatedofficesandwarehouses,manufacturedtradegoodsforuseabroad,maintainedtradingpostsandproductionfacilitiesoverseas,procuredgoodsforimport,andsoldthosegoodsbothathomeandinothercountries.Thelargevolumeoftransactionsassociatedwiththeseactivitiesseemstohavenecessitatedhierarchicalmanagementstructureswellbeforetheadventofmoderncommunicationsandtransportation.Forexample,intheHudson'sBayCompany,eachtradingoutpostwasmanagedbyasalariedagent,whocarriedoutthetradewiththeNativeAmericans,managedday-to-dayoperations,andoversawthepost'sworkersandservants.Onechiefagent,answerabletotheCourtofDirectorsinLondonthroughthe
correspondencecommittee,wasappointedwithcontroloveralloftheagentsonthebay.
Theearlytradingcompaniesdiddifferstrikinglyfrommodernmultinationalsinmanyrespects.Theydependedheavilyonthenationalgovernmentsoftheirhomecountriesandthuscharacteristicallyactedabroadtopromotenationalinterests.Theirtopmanagersweretypicallyownerswithasubstantialminorityshare,whereasseniormanagers’holdingsinmodernmultinationalsareusuallyinsignificant.Theyoperatedinapreindustrialworld,graftingasystemofcapitalistinternationaltradeontoapre-modernsystemofartisanandpeasantproduction.Despitethesedifferences,however,earlytradingcompaniesorganizedeffectivelyinremarkablymodernwaysandmeritfurtherstudyasanaloguesofmoremodern
structures.
PREP2012-Pack1-RC-001-01
VRC00009-01
Medium
Theauthor'smainpointisthat
A.
modernmultinationalsoriginatedinthesixteenthandseventeenthcenturieswiththeestablishmentofcharteredtradingcompanies
thesuccessofearlycharteredtradingcompanies,likethatofmodernmultinationals,dependedprimarilyontheirabilitytocarryoutcomplexoperations
earlycharteredtradingcompaniesshouldbemoreseriouslyconsideredbyscholarsstudyingtheoriginsofmodernmultinationals
scholarsarequitemistakenconcerningtheoriginsofmodernmultinationals
themanagementstructuresofearlycharteredtradingcompaniesarefundamentallythesameasthoseofmodernmultinationals
B.
C.
D.
E.
1/33
PREP2012-Pack1-RC-001-02
VRC00009-02
Medium
Itcanbeinferredfromthepassagethattheauthorwouldcharacterizetheactivitiesengaged
inbyearlycharteredtradingcompaniesasbeing
A.
complexenoughinscopetorequireasubstantialamountofplanningandcoordinationonthepartofmanagement
toosimpletobeconsideredsimilartothoseofamodernmultinationalcorporationasintricateasthosecarriedoutbythelargestmultinationalcorporationstoday
oftenunprofitableduetoslowcommunicationsandunreliablemeansoftransportation
hamperedbythepoliticaldemandsimposedonthembythegovernmentsoftheirhomecountries
B.
C.
D.
E.
PREP2012-Pack1-RC-001-03
VRC00009-03
Hard
Theauthorthevariousactivitiesofearlycharteredtradingcompaniesinorderto
A.
analyzethevariouswaysinwhichtheseactivitiescontributedtochangesinmanagementstructureinsuchcompanies
demonstratethatthevolumeofbusinesstransactionsofsuchcompaniesexceededthatofearlierfirms
refutetheviewthatthevolumeofbusinessundertakenbysuchcompanieswasrelativelylow
emphasizetheinternationalscopeofthesecompanies‘operations
supporttheargumentthatsuchfirmscoordinatedsuchactivitiesbyusingavailablemeansofcommunicationandtransport
B.
C.
D.
E.
PREP2012-Pack1-RC-001-04
VRC00009-04
Medium
Withwhichofthefollowinggeneralizationsregardingmanagementstructureswouldthe
authorofthepassagemostprobablyagree?
A.
Hierarchicalmanagementstructuresarethemostefficientmanagementstructurespossibleinamoderncontext.
Firmsthatroutinelyhaveahighvolumeofbusinesstransactionsfinditnecessarytoadopthierarchicalmanagementstructures.
Hierarchicalmanagementstructurescannotbesuccessfullyimplementedwithoutmoderncommunicationsandtransportation.
Modernmultinationalfirmswitharelativelysmallvolumeofbusinesstransactionsusuallydonothavehierarchicallyorganizedmanagementstructures.
Companiesthatadopthierarchicalmanagementstructuresusuallydosoinorderto
facilitateexpansionintoforeigntrade.
B.
C.
D.
E.
PREP2012-Pack1-RC-001-05 VRC00009-05
Medium
2/33
Thepassagesuggeststhatmodernmultinationalsdifferfromearlycharteredtrading
companiesinthat
A.
thetopmanagersofmodernmultinationalsownstockintheirowncompaniesratherthansimplyreceivingasalary
modernmultinationalsdependonasystemofcapitalistinternationaltraderatherthanonlessmoderntradingsystems
modernmultinationalshaveoperationsinanumberofdifferentforeigncountriesratherthanmerelyinoneortwo
theoperationsofmodernmultinationalsarehighlyprofitabledespitethemorestringentenvironmentalandsafetyregulationsofmoderngovernments
theoverseasoperationsofmodernmultinationalsarenotgovernedbythenational
interestsoftheirhomecountries
B.
C.
D.
E.
PREP2012-Pack1-RC-002
Ameteorstreamiscomposedofdustparticlesthathavebeenejectedfromaparentcometatavarietyofvelocities.Theseparticlesfollowthesameorbitastheparentcomet,butduetotheirdifferingvelocitiestheyslowlygainonorfallbehindthedisintegratingcometuntilashroudofdustsurroundstheentirecometaryorbit.Astronomershavehypothesizedthatameteorstreamshouldbroadenwithtimeasthedustparticles’individualorbitsareperturbedbyplanetarygravitationalfields.Arecentcomputer-modelingexperimenttestedthishypothesisbytrackingtheinfluenceofplanetarygravitationoveraprojected5,000-yearperiodonthepositionofagroupofhypotheticaldustparticles.Inthemodel,theparticleswererandomlydistributedthroughoutacomputersimulationoftheorbitofanactualmeteorstream,theGeminid.Theresearcherfound,asexpected,thatthecomputer-modelstreambroadenedwithtime.Conventionaltheories,however,predictedthatthedistributionofparticleswouldbeincreasinglydensetowardthecenterofameteorstream.Surprisingly,the
computer-modelmeteorstreamgraduallycametoresembleathick-walled,hollowpipe.
WhenevertheEarthpassesthroughameteorstream,ameteorshoweroccurs.Movingatover1,500,000milesperdayarounditsorbit,theEarthwouldtake,onaverage,justoveradaytocrossthehollow,computer-modelGeminidstreamifthestreamwere5,000yearsold.Twobriefperiodsofpeakmeteoractivityduringtheshowerwouldbeobserved,oneastheEarthenteredthethick-walled“pipe"andoneasitexited.ThereisnoreasonwhytheEarthshouldalwayspassthroughthestream'sexactcenter,sothetimeintervalbetweenthetwoburstsofactivitywouldvaryfromoneyeartothenext.
Hasthepredictedtwin-peakedactivitybeenobservedfortheactualyearlyGeminidmeteorshower?TheGeminiddatabetween1970and1979showjustsuchabifurcation,asecondaryburstofmeteoractivitybeingclearlyvisibleatanaverageof19hours(1,200,000miles)afterthefirstburst.ThetimeintervalsbetweentheburstssuggesttheactualGeminidstreamis
about3,000yearsold.
PREP2012-Pack1-RC-002-01 VRC07544-01
Hard
3/33
Theauthorstatesthattheresearchdescribedinthefirstparagraphwasundertakeninorder
to
A.
B.
C.
D.
E.
determinetheageofanactualmeteorstream
dentifythevariousstructuralfeaturesofmeteorstreamsexplorethenatureofaparticularlyinterestingmeteorstream
testthehypothesisthatmeteorstreamsbecomebroaderastheyage
showthatacomputermodelcouldhelpinexplainingactualastronomicaldata
PREP2012-Pack1-RC-002-02
VRC07544-02
Hard
Itcanbeinferredfromthepassagethatwhichofthefollowingwouldmostprobablybe
observedduringtheEarth'spassagethroughameteorstreamiftheconventionaltheoriesmentionedinthehighlightedtextwerecorrect?
A.
Meteoractivitywouldgraduallyincreasetoasingle,intensepeak,andthengraduallydecline.
Meteoractivitywouldbesteadythroughouttheperiodofthemeteorshower.
Meteoractivitywouldrisetoapeakatthebeginningandattheendofthemeteorshower.Randomburstsofveryhighmeteoractivitywouldbeinterspersedwithperiodsofveryactivity.
InyearsinwhichtheEarthpassedthroughonlytheouterareasofameteorstream,
meteoractivitywouldbeabsent.
B.
C.
D.
E.
PREP2012-Pack1-RC-002-03
VRC07544-03
Hard
Accordingtothepassage,whydothedustparticlesinameteorstreameventuallysurround
acomet'soriginalorbit?
A.
B.
C.
D.
E.
Theyareejectedbythecometatdifferingvelocities.
Theirorbitsareuncontrolledbyplanetarygravitationalfields.Theybecomepartofthemeteorstreamatdifferenttimes.
Theirvelocityslowsovertime.
Theirejectionvelocityisslowerthanthatofthecomet.
PREP2012-Pack1-RC-002-04
VRC07544-04
Hard
Thepassagesuggeststhatwhichofthefollowingisapredictionconcerningmeteorstreams
thatcanbederivedfromboththeconventionaltheoriesmentionedinthehighlightedtextandthenewcomputerderivedtheory?
Dustparticlesinameteorstreamwillusuallybedistributedevenlythroughoutanycrosssectionofthestream.
TheorbitsofmostmeteorstreamsshouldcrosstheorbitoftheEarthatsomepointand
giverisetoameteorshower.
4/33
C.
Overtimethedistributionofdustinameteorstreamwillusuallybecomedenserattheoutsideedgesofthestreamthanatthecenter.
Meteorshowerscausedbyoldermeteorstreamsshouldbe,onaverage,longerindurationthanthosecausedbyveryyoungmeteorstreams.
Theindividualdustparticlesinoldermeteorstreamsshouldbe,onaverage,smallerthan
thosethatcomposeyoungermeteorstreams.
D.
E.
PREP2012-Pack1-RC-002-05
VRC07544-05
Medium
Whichofthefollowingisanassumptionunderlyingthelastsentenceofthepassage?
A.
Ineachoftheyearsbetween1970and1979,theEarthtookexactly19hourstocrosstheGeminidmeteorstream.
ThecometassociatedwiththeGeminidmeteorstreamhastotallydisintegrated.TheGeminidmeteorstreamshouldcontinuetoexistforatleast5,000years.
TheGeminidmeteorstreamhasnotbroadenedasrapidlyastheconventionaltheorieswouldhavepredicted.
Thecomputer—modelGeminidmeteorstreamprovidesanaccuraterepresentationof
thedevelopmentoftheactualGeminidstream.
B.
C.
D.
E.
PREP2012-Pack1-RC-003
TworecentpublicationsofferdifferentassessmentsofthecareerofthefamousBritishnurseFlorenceNightingale.AbookbyAnneSummersseekstodebunktheidealizationsandpresentarealityatoddswithNightingale'sheroicreputation.AccordingtoSummers,Nightingale'simportanceduringtheCrimeanWarhasbeenexaggerated:notuntilnearthewar'senddidshebecomesupervisorofthefemalenurses.Additionally,Summerswritesthatthecontributionofthenursestothereliefofthewoundedwasatbestmarginal.Theprevailingproblemsofmilitarymedicinewerecausedbyarmyorganizationalpractices,andtheadditionofafewnursestothemedicalstaffcouldbenomorethansymbolic.
Nightingale’splaceinthenationalpantheon,Summersasserts,islargelyduetothe
propagandisticeffortsofcontemporarynewspaperreporters.
Bycontrast,theeditorsofanewvolumeofNightingale'slettersviewNightingaleasapersonwhosignificantlyinfluencednotonlyherownagebutalsosubsequentgenerations.Theyhighlightherongoingeffortstoreformsanitaryconditionsafterthewar.Forexample,whenshelearnedthatpeacetimelivingconditionsinBritishbarracksweresohorriblethatthedeathrateofenlistedmenfarexceededthatofneighboringcivilianpopulations,shesucceededinpersuadingthegovernmenttoestablishaRoyalCommissionontheHealthoftheArmy.Sheusedsumsraisedthroughpubliccontributionstofoundanurses’traininghospitalinLondon.Eveninadministrativematters,theeditorsassert,herpracticalintelligencewasformidable:asrecentlyas1947theBritishArmy'smedicalserviceswerestill
usingthecost-accountingsystemshehaddevisedinthe1860's.
IbelievethattheevidenceofherletterssupportscontinuedrespectforNightingale's
brillianceandcreativity.Whencounselingavillageschoolmastertoencouragechildrentousetheirfacultiesofobservation,shesoundslikeamoderneducator.Herinsistenceon
5/33
classifyingtheproblemsoftheneedyinordertodeviseappropriatetreatmentsissimilartotheapproachofmodernsocialworkers.Insum,althoughNightingalemaynothaveachievedallofhergoalsduringtheCrimeanWar,herbreadthofvisionandabilitytorealizeambitious
projectshaveearnedheraneminentplaceamongtheranksofsocialpioneers.
PREP2012-Pack1-RC-003-01
VRC07619-01
Medium
Thepassageisprimarilyconcernedwithevaluating
A.
B.
C.
D.
E.
theimportanceofFlorenceNightingale'sinnovationsinthefieldofnursingcontrastingapproachestothewritingofhistoricalbiographycontradictoryaccountsofFlorenceNightingale’shistoricalsignificance
thequalityofhealthcareinnineteenthcenturyEngland
theeffectoftheCrimeanWarondevelopmentsinthefieldofhealthcare
PREP2012-Pack1-RC-003-02
VRC07619-02
Hard
Accordingtothepassage,theeditorsofNightingale’sletterscreditherwithcontributingto
whichofthefollowing?
A.
ImprovementofthesurvivalrateforsoldiersinBritishArmyhospitalsduringtheCrimeanWar
Thedevelopmentofanurses’trainingcurriculumthatwasfarinadvanceofitsdayTheincreaseinthenumberofwomendoctorspracticinginBritishArmyhospitalsEstablishmentofthefirstfacilityfortrainingnursesatamajorBritishuniversity
ThecreationofanorganizationformonitoringthepeacetimeIrvingconditionsofBritish
soldiers
B.
C.
D.
E.
PREP2012-Pack1-RC-003-03
VRC07619-03
Easy
ThepassagesuggestswhichofthefollowingaboutNightingale’srelationshipwiththeBritish
publicofherday?
A.
B.
C.
D.
Shewashighlyrespected,herprojectsreceivingpopularandgovernmentalsupport.Sheencounteredresistancebothfromthearmyestablishmentandthegeneralpublic.Shewassupportedbytheworkingclassesandopposedbythewealthierclasses.
Shewassupportedbythemilitaryestablishmentbuthadtofightthegovernmentalbureaucrat.
Afterinitiallybeingreceivedwithenthusiasm,shewasquicklyforgotten.
E.
PREP2012-Pack1-RC-003-04
VRC07619-04
Easy
WithwhichofthefollowingstatementsregardingthedifferinginterpretationsofNightingale’s
importancewouldtheauthormost
6/33
A.
SummersmisunderstoodboththeimportanceofNightingale'sachievementsduringtheCrimeanWarandhersubsequentinfluenceonBritishpolicy.
TheeditorsofNightingale’slettersmadesomevalidpointsaboutherpracticalachievements,buttheystillexaggeratedherinfluenceonsubsequentgenerations.AlthoughSummers’accountofNightingale’sroleintheCrimeanWarmaybeaccurate;sheignoredevidenceofNightingale’ssubsequentachievementthatsuggeststhatherreputationasaneminentsocialreformeriswelldeserved.
TheeditorsofNightingale'slettersmistakenlypropagatedtheoutdatedidealizationofNightingalethatonlyimpedesattemptstoarriveatabalancedassessmentofhertruerole.
TheevidenceofNightingale'sLetterssupportsSummers’conclusionsbothabout
Nightingale’sactivitiesandaboutherinfluence.
B.
C.
D.
E.
PREP2012-Pack1-RC-003-05
VRC07619-05
Medium
Inthelastparagraph,theauthorisprimarilyconcernedwith
A.
B.
C.
D.
E.
summarizingtheargumentsaboutNightingalepresentedinthefirsttwoparagraphsrefutingtheviewofNightingale'scareerpresentedintheprecedingparagraphanalyzingtheweaknessesoftheevidencepresentedelsewhereinthepassage
citingevidencetosupportaviewofNightingale’scareer
correctingafactualerroroccurringinoneoftheworksunderreview
PREP2012-Pack1-RC-004
Customerloyaltyprogramsareattemptstobondcustomerstoacompanyanditsproductsandservicesbyofferingincentives—suchasairlinefrequentflyerprogramsorspecialcreditcardswithvaluablebenefits—t0loyalcustomers.Insupportofloyaltyprograms,companiesofteninvokethe“80/20"principle,whichstatesthatabout80percentofrevenuetypicallycomesfromonlyabout20percentofcustomers.However,thisprofitable20percentarenotnecessarilyloyalbuyers,especiallyinthesenseofexclusiveloyalty.Studieshavedemonstratedthatonlyabout10percentofbuyersformanytypesoffrequentlypurchasedconsumergoodsare100percentloyaltoaparticularbrandoveraone-yearperiod.Moreover,100-percent-loyalbuyerstendtobelightbuyersoftheproductorservice.“Dividedloyalty”betterdescribesactualconsumerbehavior,sincecustomerstypicallyvarythebrandstheybuy.Thereasonsforthisbehaviorarefairlystraightforward:peoplebuydifferentbrandsfordifferentoccasionsorforvariety,orabrandmaybetheonlyoneinstockormayofferbettervaluebecauseofaspecialdeal.Mostbuyerswhochangebrandsarenotlostforever;usually,theyareheavyconsumerswhosimplyprefertobuyanumberofbrands.Suchmultibandloyaltymeansthatonecompany'smostprofitablecustomerswillprobablybeits
competitors’mostprofitablecustomersaswell.
Still,advocatesofloyaltyprogramscontendthatsuchprogramsarebeneficialbecausethe
costsofservinghighlyloyalcustomersarelower,andbecausesuchloyalcustomersareless
7/33
pricesensitivethanothercustomers.Itistruethatwhentherearestart-upcosts,suchascreditchecks,involvedinservinganewcustomer,thecostsexceedthoseofservingarepeatcustomer.However,itisnotatallclearwhythecostsofservingahighlyloyalcustomershouldinprinciplebedifferentfromthoseofservinganyothertypeofrepeatcustomer.Thekeyvariablesdrivingcostaresizeandtypeoforder,specialversusstandardorder,andsoon,nothigh-loyaltyversusdivided-loyaltycustomers.Asforpricesensitivity,highlyloyal
customersmayinfactcometoexpectapricediscountasarewardfortheirloyalty.
PREP2012-Pack1-RC-004-01
VRC000108-01
Medium
Theprimarypurposeofthepassageisto
A.
B.
C.
D.
questionthenotionthatcustomerloyaltyprogramsarebeneficial
examinethereasonswhymanycustomersbuymultiplebrandsofproductsproposesomepossiblealternativestocustomerloyaltyprograms
demonstratethatmostcustomersarenotcompletelyloyaltoanyonebrandofproductorservice
comparethebenefitsofcustomerloyaltyprogramswiththoseofothertypesofpurchase
incentiveprograms
E.
PREP2012-Pack1-RC-004-02
VRC000108-02
Easy
Thepassagementionseachofthefollowingasapotentialreasonforcustomers’divided
loyaltyEXCEPT
A.
B.
C.
D.
E.
aparticularbrandmaybetheonlyoneavailableaparticularbrandmaybeofferedatadiscount
customerswilloftenbuymultiplebrandsoutofadesireforvariety
customerswilloftenbuyanunfamiliarbrandwhenitisnewonthemarketcustomerswilloftenbuycertainbrandsforcertainoccasions
PREP2012-Pack1-RC-004-03
VRC000108-03
Easy
Accordingtothepassage,advocatesofcustomerloyaltyprogramsclaimwhichofthe
followingabouthighlyloyalcustomers?
A.
B.
C.
D.
E.
Theyoftenexpectpricediscountsasarewardfortheirloyaltytoaproduct.
Theycanbeservedatlowerexpensetoacompanythancannonloyalcustomers.Theytendtobelightbutpredictablebuyersoftheproductorserviceinquestion.Theyaretotryoutnewbrandsorproductsthatappearonthemarket.
Theyaredifficulttodifferentiatestatisticallyfromothertypesofrepeatcustomers.
PREP2012-Pack1-RC-004-04
VRC000108-04
Easy
Thepassagesuggeststhatcompaniesthatinvokethe“80/20"principleinsupportof
customerloyaltyprogramswhichofthefollowing
8/33
A.
Awell-designedcustomerloyaltyprogramcanincreasethenumberofacompany'sloyalcustomersbyasmuchas80percent.
About20percentofanygivencompany'smostprofitablecustomersarelikelytobeits
competitors’mostprofitablecustomersaswell.
Itisunreasonabletoexpectmorethan20percentofcustomerstobe100percentloyaltoanyparticularbrandofproduct.
Even“loyal”customerscannotreasonablybeexpectedtosticktooneparticularbrandofproductmorethan80percentofthetime.
Arelativelysmallnumberofloyalcustomersisresponsibleforabout80percentofa
company'sprofits.
B.
C.
D.
E.
PREP2012-Pack1-RC-004-05
VRC000108-05
Medium
Thesecondparagraphfunctionsprimarilyto
A.
B.
C.
D.
E.
proposesolutionstocertainproblemsinherentincustomerloyaltyprogramsemphasizecertainrisksinherentincustomerloyaltyprograms
addresscertaincontentionsputforthbyadvocatesofcustomerloyaltyprograms
defendcertainspecificaspectsofcustomerloyaltyprogramsagainstcriticismreconcilecompetingviewpointsregardingtheofcustomerloyaltyprograms
PREP2012-Pack1-RC-004-06
VRC000108-07
Medium
Theauthorofthepassagesuggeststhatwhichofthefollowingismostlikelytobetrueofa
customerwhoisexclusivelyloyaltoaparticularbrandofproduct?
A.
B.
Thecustomerprobablybeganbuyingthatbrandofproductonlywithinthepastyear.Thecustomerisprobablyamongthemostprofitablecustomersforthecompanythatmanufacturesthatbrandofproduct.
Thecustomerisprobablynotaheavyconsumerofthatparticulartypeofproduct.
Thecustomerisprobablyaloyalcustomerwhenpurchasingothertypesofproductsaswell.
Thecustomerprobablysamplednumerousbrandsofthattypeofproductbefore
becomingloyaltoaparticularbrand.
C.
D.
E.
PREP2012-Pack1-RC-005
Manymanagersareinfluencedbydangerousmythsaboutpaythatleadtocounterproductivedecisionsabouthowtheircompaniescompensateemployees.Onesuchmythisthatlaborrates,therateperhourpaidtoworkers,areidenticalwithlaborcosts,themoneyspentonlaborinrelationtotheproductivityofthelaborforce.Thismythleadstotheassumptionthatacompanycansimplyloweritslaborcostsbycuttingwages.Butlaborcostsandlaborratesarenotinfactthesame:onecompanycouldpayitsworkersconsiderablymorethananotherandyethavelowerlaborcostsifthatcompany'sproductivitywerehigherduetothetalentofitsworkforce,theefficiencyofitsworkprocesses,orotherfactors.Theconfusionofcosts
withratespersistspartlybecauselaborratesareaconvenienttargetformanagerswhowant
9/33
tomakeanimpactontheircompany'sbudgets.Becauselaborratesarehighlyvisible,managerscaneasilycomparetheircompany'srateswiththoseofcompetitors.Furthermore,laborratesoftenappeartobeacompany'smostmalleablefinancialvariable:cuttingwagesappearsaneasierwaytocontrolcoststhansuchoptionsasreconfiguringworkprocessesoralteringproductdesign.
Themyththatlaborratesandlaborcostsareequivalentissupportedbybusinessjournalists,whofrequentlyconfoundthetwo.Forexample,prominentbusinessjournalsoftenremarkonthe“high"costofGermanlabor,citingasevidencetheaverageamountpaidtoGermanworkers.Themythisalsoperpetuatedbythecompensationconsultingindustry,whichhasitsownincentivetokeepsuchmythsalive.First,althoughsomeoftheseconsultingfirmshaverecentlybroadenedtheirpracticesbeyondtheareaofcompensation,theirmainstaycontinuestobeadvisingcompaniesonchangingtheircompensationpractices.Suggestingthatacompany'sperformancecanbeimprovedinsomeotherwaythanbyalteringitspaysystemmaybeempiricallycorrectbutcontrarytotheconsultants’interests.Furthermore,changestothecompensationsystemmayappeartobesimplertoimplementthanchangestootheraspectsofanorganization,somanagersaremorelikelytofindsuchadvicefromconsultantspalatable.Finally,totheextentthatchangesincompensationcreatenewproblems,theconsultantswillcontinuetohaveworksolvingtheproblemsthatresultfrom
theiradvice.
PREP2012-Pack1-RC-005-01
VRC000361-01
Medium
Theauthorofthepassagementionsbusinessjournals(seehighlightedtext)primarilyin
orderto
A.
demonstratehowaparticularkindofevidencecanbeusedtosupporttwodifferentconclusions
castdoubtonaparticularviewabouttheaverageamountpaidtoGermanworkerssuggestthatbusinessjournalistsmayhaveavestedinterestinperpetuatingaparticularview
identifyonesourceofsupportforaviewcommonamongbusinessmanagers
indicateawayinwhichaparticularmythcouldbedispelled
B.
C.
D.
E.
PREP2012-Pack1-RC-005-02
VRC000361-02
Easy
Accordingtothepassage,whichofthefollowingistrueaboutchangestoacompany's
compensationsystem?
A.
Theyareoftenimplementedinconjunctionwithacompany'seffortstoreconfigureitsworkprocesses.
Theyhavebeenadvocatedbyprominentbusinessjournalsasthemostdirectwayforacompanytobringaboutchangesinitslaborcosts.
Theyaremorelikelytoresultinanincreaseinlaborcoststhantheyaretobringabout
competitiveadvantagesforthecompany.
B.
C.
10/33
Theysometimesresultinsignificantcostsavingsbutarelikelytocreatelabor-relationsproblemsforthecompany.
Theymayseemtomanagerstoberelativelyeasytoimplementcomparedwithother
kindsofchangesmanagersmightconsider.
PREP2012-Pack1-RC-005-03
VRC000361-04
Easy
Theprimarypurposeofthepassageisto
A.
B.
C.
D.
describeacommonpracticeusedbymanagerstocontrollaborcosts
examinetherelationbetweenlaborcostsandothercostsincurredbybusinessesexplainwhylaborratesareamoresignificantfactorthanlaborcostsformostbusinesses
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