Reading Comprehension

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Question #1

Mergers and acquisitions in the U.S. food industry have provoked controversy for many years. Critics are concerned that mergers, by reducing the numbers of firms and increasing industry concentration, make it easier for firms to increase output prices and lower wages and input prices. Others argue that mergers and acquisitions (M&As) increase efficiencies and boost productivity by allowing companies to lower costs and provide consumers with goods at lower prices.

Until 1977, consolidation was not much of an issue for most food industries. At that time, the average four-firm concentration ratios (the percentage of the industry that is controlled by the top four firms) for eight food industries-meatpacking, meat processing, poultry slaughter and processing, cheese making, fluid milk processing, flour milling, feed processing, and oilseed crushing (soybean, cottonseed, and corn)-were about 31 percent. A wave of mergers and acquisitions led to a jump in average concentration to about 44 percent by 1992. Were these M&As efficient, and did acquired companies increase their productivity after being acquired?

Labor productivity, or output per worker, is one measure of production efficiency. Using U.S. Census Bureau plant-level data to examine processing plants in the eight food industries, researchers found that the processing plants were highly productive before being acquired and they significantly improved their labor productivity afterward. The five major food industries-meat processing, dairy (which includes both milk and cheese) and grain processing (which includes flour milling and feed processing)-doubled their output per worker, and two other industries realized at least 50-percent increases in output per worker over 1972-92. Only one of the eight industries, poultry slaughter and processing, failed to increase output per worker, and it experienced a vast increase in the processing of value-added products as plants switched from producing whole birds to producing poultry parts. The analysis suggests that mergers and acquisitions contributed to the general improvement in labor productivity.

Which of the following can logically be inferred from the information given in the third paragraph?


(A) The cheese making industry did not see a sizable increase in worker productivity between 1972 and 1992.

(B) There were many more workers hired for the meat processing, dairy and grain processing industries than for any other sector.

(C) The oilseed crushing industry saw at least a 50% rise in labor productivity between 1972 and 1992.

(D) Many poultry workers were laid off from their work due to the increase in processing of value-added products.

(E) Processing plants in 1992 were likely to have the same equipment, training and worker safety laws as they did in 1972.

C should be correct.

It is mentioned in the last paragraph that -

The five major food industries-meat processing, dairy (which includes both milk and cheese) and grain processing (which includes flour milling and feed processing)-doubled their output per worker, and two other industries realized at least 50-percent increases in output per worker over 1972-92. Only one of the eight industries, poultry slaughter and processing, failed to increase output per worker

So, 5 industries increased productivity by 200% and 2 industries by at least 50%. Since poultry slaughter and processing is the 8th industry, oilseed crushing should be one of the seven. Thus, oilseed crushing industry saw a rise in labor productivity by at least 50%.

niksworth wrote:C should be correct.

It is mentioned in the last paragraph that -

The five major food industries-meat processing, dairy (which includes both milk and cheese) and grain processing (which includes flour milling and feed processing)-doubled their output per worker, and two other industries realized at least 50-percent increases in output per worker over 1972-92. Only one of the eight industries, poultry slaughter and processing, failed to increase output per worker

So, 5 industries increased productivity by 200% and 2 industries by at least 50%. Since poultry slaughter and processing is the 8th industry, oilseed crushing should be one of the seven. Thus, oilseed crushing industry saw a rise in labor productivity by at least 50%.

same reasoning and answer...