English for Economics

8. Laissez-faire

H. an institutional arrangement that fosters trade or exchange

II. Put the words in the correct order:

1. Restrictions, can, on, business, do, face, with, owners, they, capital, many, their, what.

2. Analysis, commodities, individual, with, decisions, microeconomic, deals, particular, about.

3. Science, of, extent, it, principles, a, economics, to, set, is, analytical, the, comprises, that, a.

4. Studies, every, for, theory, commodity, general, market, simultaneously, equilibrium, every.

5. All, aggregate, we, purchases, discuss, of, behavior, total, the, can, households, and, production, to, firms, and.

6. Needs, it, prosperity, the, know, everyone, explains, to, framework, economics, of, some, because.

III. Fill in the gaps with the words or word combinations in italics:

Market forces, value, depression, business activity, planning, economists, welfare, inputs, economic growth, capitalist, consumer goods, national income, macroeconomics, publicly owned, management.

1. The central problem of … in the second half of the twentieth century is the … of prosperity to maximize individual … .

2. …look forward to a future where the stockpiling of … ceases to be the major preoccupation of people's minds.

3. In former times, the free play of … was left to decide the level of …, and the rate of … .

4. Modern economics is the study of how … is determined, and how … relate to each other in production.

5. The new economics can handle the cycles of … which caused such distress in the early years of the … system.

6. Even in countries with rigid state …, where large companies are …, those who can afford it can own a small business.

7. In the past economy tended to grow in spiral-like movements of … .

IV. Are the following statements true or false? Correct the false ones:

1. Capitalism can never exist with central planning.

2. The whole economy stands or falls by what is achieved for the individual.

3. The unique feature of economics is that it studies human behavior.

4. Economics shouldn't be regarded as a set body of principles.

5. Macroeconomics in modern society is largely a study of government economics.

6. Controls over economic activity are likely to decrease in the future.

7. The outcome of any macroeconomic policy is always certain.

8. There is still disagreement about the nature and scope of economic inquiry.

9. Private ownership in a country and its reliance on free markets are equivalent features.

10. As a rule, microeconomists focus on one aspect of economic behavior in order to preserve the simplicity of the analysis.

V. Translate the following sentences into English:

1. Экономика, в отличие от родственных социальных наук, изучает поведение человека в условиях рынка.

2. Предметом макроэкономической теории является функционирование экономики, рассматриваемой как единое целое.

3. Экономика капитализма отнюдь не исключает государственного планирования.

4. Макроэкономическое равновесие представляет собой единственный ценовой уровень, при котором объем предлагаемой на рынке совокупной продукции равен величине совокупного спроса.

5. Экономический рост - это долгосрочная тенденция увеличения реального объема производства.

6. Такие ключевые вопросы, как место экономики в ряду других дисциплин, методы и масштабы экономического исследования и др., до сих пор вызывают оживленные споры.

7. Спад - исходная фаза экономического цикла, характеризующаяся снижением деловой активности, сокращением объемов производства и инвестиций, а также ростом безработицы.

8. Различают два подхода к изучению совокупного предложения: классический (долгосрочный период) и кейнсианский (краткосрочный период).

9. В определенной точке экономического цикла объемы производства достигают максимальных значений, после чего начинается их постепенное снижение, зачастую в результате государственного регулирования.

10. В рамках микроэкономики рассматривается поведение и взаимодействие индивидов, домохозяйств, фирм и функционирование отдельных рынков.

TEST 2. (Labour, Unemployment)

I. Match the terms with their definitions:

1. Incentive	A. the systematic shifting of employees from one job to another
2. Labour force	B. the irreducible minimum level of unemployment in a dynamic society
3. Unemployment rate	C. working at a secondary job
4. Sabotage	D. an additional payment made to employees as a means of increasing production
5. Frictional unemployment	E. work requiring little specialized training
6. Moonlighting	F. the total number of workers available for employment in a country
7. Job rotation	G. the deliberate destruction, or damage of equipment, a public service, etc., by dissatisfied employees
8. Unskilled labour	H. the percentage of people without a job but registered as being willing and available for work

II. Put the words in the correct order:

1. Of, increases, labour, to, moonlighting, supply, entrepreneurs, the, available.

2. Demand, a, leads, output, in, lower, and, fall, to, employment, aggregate.

3. Difference, unemployment, and, stresses, modern, the, involuntary, analysis, between, voluntary.

4. Continuing, are, retirement, of, people, capable, age, employment, in, many, productive, of.

5. Standard, force, fully, the, raising, of, depends, living, a, labour, on, effective.

6. Motivating, and, enrichment, provide, to, advancement, job, opportunities, tends, growth, for.

III. Fill in the gaps with the words or word combinations in italics:

Working hours, specialization, job enlargement, take on, supply, wage rate, skilled, income, competition, quality, train, participation rate, redundant.

1. A lot of … workers may be made … when an industry declines in the face of foreign … .

2. In …, the employee is given more things to do within the same job.

3. More important than the actual … of labour is the … of labour.

4. The … is the percentage of the population of working age who declare themselves to be in the labour force.

5. Some workers prefer extra … to shorter … .

6. Firms are often reluctant to … and … older workers.

7. Some people want to work at the current … but can't find jobs.

8. The most significant drawback of … is monotony.

IV. Are the following statements true or false? Correct the false ones:

1. Moonlighting is quite common because most people like working late.

2. Frictional unemployment can be reduced.

3. The labour force comprises all those employed or willing to find a job.

4. Where there are few incentives labour is less efficient.

5. Demand-deficient unemployment occurs when aggregate demand exceeds full-employment aggregate demand.

6. Skilled labour tends to be more specific than semi-skilled labour.

7. Structural unemployment is created when the wage is deliberately maintained above the equilibrium wage rate.

8. Labour is the supply of human resources, both physical and mental, which are available to engage in the production of goods and services.

9. Classical unemployment is involuntary.

10. All those people who are looking for work will be automatically included in the official statistics for the labour force, whether or not they have registered as unemployed.

V. Translate the following sentences into English:

1. В состав рабочей силы не включаются две группы населения: лица нетрудоспособного возраста, а также лица, которые по каким-либо причинам не могут или не хотят трудиться.

2. К наиболее серьезным социальным последствиям безработицы относится потеря квалификации.

3. Материальное поощрение дает стимул для повышения производительности труда.

4. Структурная безработица возникает в результате изменений в экономике, приводящих к сокращению спроса на одни профессии и повышению спроса на другие.

5. Безработные - это люди трудоспособного возраста, которые не имеют работы, но активно ее ищут и готовы приступить к работе немедленно.

6. Число фрикционных и структурных безработных в сумме составляет естественный уровень безработицы.

7. В настоящее время многие устраиваются на работу по совместительству, поскольку она приносит дополнительный доход.

8. В сложившихся экономических условиях большинство людей пенсионного возраста стараются по возможности продолжать работу.

9. Существует взаимозависимость между повышением эффективности труда и ростом уровня жизни.

10. Средства, вложенные в образование, со временем окупаются, так как они позволяют человеку найти более интересную и высокооплачиваемую работу.

TEST 3. (Wants and Utilities, Supply and Demand)

I. Match the terms with their definition:

1. marginal utility	A. is decided by the interaction of supply and demand
2. price	B. are the basic needs of mankind
3. wants	C. describes the behaviour of sellers
4. total utility	D. is the desire to buy supported by the ability to pay
5. effective demand	E. is the utility of one unit of a good or service
6. supply	F. is the satisfaction we receive from possessing one extra unit of a commodity

II. Put the words in the correct order:

1. wants, satisfy, which, purpose, economy, to create, mankind's, the, of, an, is, utilities, will.

2. is, varies, changing, demand, not, but, with, fixed, conditions.

3. the, the, of, of, of, effects, price, enterprise, an, commodity, prospects, profitability.

4. “wants”, “wants”, even, we, these, when, other, present, more, themselves, have, basic, advanced.

5. are, our, by, which, services, attention, intangible, personal, “utilities”, needs, satisfy.

III. Fill in the gaps with the words in italics:

Scale, commodity, goods, price, requirements, scale, substitutes, services, purchasers, competitor.

1. An increased demand raises … .

2. When the price of a … rises the quantity that is supplied will be increased.

3. … are tangible items which either satisfy the basic … of human life or make that life fuller and richer.

4. Scale of preferences is an arrangement of things in one's own mind with the most preferred items towards the top of the … .

5. Demand is the quantity of goods and … which … are prepared to buy at a given price in a given period of time.

6. If the goods are close … for one another, the price of one will be seriously affected by a lower price of its … .

IV. Are the statements true or false? Correct the false ones:

1. Man's wants and demands are unlimited.

2. Demand is set.

3. Total utility usually rises while marginal utility always falls.

4. When the price of a commodity rises the quantity that is demanded will be increased.

5. Suppliers don't vary in their ability to supply.

6. A progressive system of taxation strengthens the purchasing power of consumers.

7. If there is an alternative to a commodity, then it is no longer a necessity.

8. A decreased supply lowers market price.

V. Translate the following terms into English:

1. потребительская корзина

2. предельная полезность

3. человеческие потребности

4. убывающая предельная полезность

5. удовлетворять потребности

6. создавать полезности

7. общая полезность

8. основные требования (запросы) человеческой жизни

9. потребительские товары

10. факторы производства

TEST 4. (Market, Markets and Monopolies)

I. Match the terms with their definitions:

1. Equilibrium	A. prices now current in the market
2. Prevailing price	B. a state of balance when all the economic forces present in a situation have an equal influence and there is no tendency to change
3. Patent	C. something which encourages one to greater activity
4. Barriers to entry	D. a market with single buyer who has some influence over the price of his output
5. Incentive	E. protection from being copied or sold by those who do not have a right to do so
6. Franchise	F. factors which prevent the entry of new firms into an industry
7. Monopsony	G. privileges
8. Natural monopoly	I. a market consisting of two sellers
9. Duopoly	J. a situation when a single firm can serve a particular market at lower cost than any combination of two or more firms

II. Match the two parts of the sentences:

1. Natural monopoly arises out of … .

2. Monopoly is a situation where … .

3. Monopolies can only continue to exist if … .

4. When there are only a few buyers, … .

5. An oligopoly is a market characterized by a small number of firms … .

6. Oligopoly is distinguished from perfect competition because … .

7. When all firms are of (roughly) equal size, … .

8. A market is simply a mechanism, … .

A. …which allows individuals or organizations to trade with each other

B. …the properties of productive technology

C. …who realize they are independent in their pricing and out polices

D. …the oligopoly is said to be symmetric

E. …each firm in an oligopoly has to take into account their independence

F. …there is a single seller in the market

G. …the market is defined as an oligopsony

H. …there are barriers to entry

III. Fill in the blanks with the words or word combinations in italics:

Aggregate supply, geographic areas, scope, aggregate demand, buyers, transacted, dimensions, actual, sellers, products, potential

1. Markets can be in “equilibrium” or “disequilibrium” depending on whether or not … equals … at the prevailing price.

2. Markets may be local, regional, national or international in … and do not necessarily require … and … to meet or communicate directly with each other.

3. Business may be … through the use of intermediaries as well.

4. There are two fundamental … of market definition: the product market, that is, where … group together and the geographic market, that is, where… group together.

5. Market definition generally includes … and … sellers.

IV. Are the following statements true or false? Correct the false ones:

1. When a market functions properly, the quantity of goods and services demanded and supplied must be equal at some given price.

2. Markets are similar in scope. There are only local markets where buyers and sellers must meet and communicate directly with each other.

3. To define a relevant market all you need is to identify the number of companies and products available in the market.

4. Monopolists, being largely immune from competitive pressures, do not have the appropriate incentives to minimize costs or undertake technological change.

5. An oligopoly is a market characterized by a large number of firms who realize they are dependent in their pricing and output polices.

V. Translate the following sentences into English:

1. Рынок - это открытое для всех место, где покупаются и продаются товары или услуги, напрямую или через посредников.

2. Рынок, где спрос на продукцию больше имеющегося предложения, называется рынком продавца, а рынок, где предложение превышает спрос, цены низкие, а условия сделок устанавливаются покупателями, называется рынком покупателя.

3. Монополистическая конкуренция - это ситуация, когда на рынке присутствуют несколько продавцов, каждый из которых способен устанавливать цену, то есть каждый имеет некоторую монополистическую власть.

4. Монопольное положение позволяет фирме сохранять любые сверхприбыли.

5. Цена, при которой предложение товара равно спросу на него, называется равновесной ценой.

6. Цены на аналогичные товары могут отличаться и зависеть от времени и места продажи или его качества.

7. Картель создается для взаимной пользы фирм - членов картеля.

TEST 5. (Money, Pricing, The Problem of Inflation)

I. Match the terms with their definitions:

1. Penetration pricing	A. selling a product at a high price, sacrificing high sales in order to earn high profits
2. Creaming (skimming)	B. the quantity of goods or services that money will buy at a certain time
3. Legal tender	C. the bank's liabilities to its customers
4. Demand inflation	D. selling a different price for the same product in different segments of the market
5. Token money	E. the kind of inflation that is caused by rising costs of labour and materials
6. Price discrimination	F. coins in which the metallic content is less valuable than the face value
7. Cost inflation	G. selling an initial low price for a new product so that it is attractive to customers
8. Bank deposit	H. the form of money in which a person has a right by law to pay a debt
9. Barter	I. the kind of inflation caused by an excess of demand over supply resulting in a decrease in the value of money
10. Value of money	J. exchange of goods for goods

II. Put the words in the correct order:

1. system, trade, until, has, is, full, a, usually, by, on, carried, barter, developed, money, been.

2. charged, any, needs, carefully, the, by, to think, price, rivals, business, about.

3. be, the, price, must, general, a, form, level, average, of, therefore.

4. acceptable, to be, it, if, tender, is not, legal, generally, will, then, money, cease.

5. is, would, once, in, business, the, a, established, product, raise, its, market, the, price.

6. of, index, the, price, normal, of, method, is, the, calculation, by, use.

III. Fill in the gaps with the words or word combinations in italics:

Money, creaming, value, cost inflation, losses, demand inflation, increases, barter, legal tender, price

1. …is setting a high price for a product initially and lowering it later on.

2. Money is only a claim against the real goods that have … .

3. …assumes that the collective upwards “push” of costs is sufficient to raise the general level of prices.

4. Charging a price similar to competitors is one way to set prices but it might lead to … .

5. …in the quantity of money were likely to lead to increases in prices.

6. If … is not generally acceptable then it will cease to be money.

7. …is one element of the marketing mix.

8. …is of no use unless the wealth is being created.

9. …takes place when supply cannot respond (i.e. when most of all resources are already employed) and leads to a rise in prices instead of to extra output.

10. …entails the necessity of a double coincidence of wants.

IV. Are the following statements true or false? Correct the false ones:

1. Paper money is convertible into gold.

2. Bank deposits, which are money, are not legal tender.

3. A fall in prices means that the value of money has risen.

4. The value of money changes proportionally with changes in the price level.

5. The price of similar competitive products does not influence pricing.

6. When the price covers both the average fixed and variable costs of the product, the business is said to be full-cost pricing.

7. The measurement of the inflation does not depend upon the general price level.

8. The selling of the country's currency often takes place when inflation rates exceed the tolerances allowed for by the government.

V. Translate the following terms into English:

1. стратегия «снятия сливок»

2. стратегия «проникновения на рынок»

3. ценовая дискриминация

4. индекс розничных цен

5. ползущая инфляция

6. поднимать уровень цен

7. средство сохранения стоимости

8. номинальная стоимость

9. внутренняя (реальная) стоимость

10. законное платежное средство

TEST 6. (Banking, Central Banking, Loans in the UK)

I. Match the terms with their definitions:

1. Legal tender	A. a bank officially appointed by law to work closely with the government
2. Central bank	B. a joint stock bank
3. The balloon loan	C. the form of money in which a person has a right by law to pay a debt
4. Commercial bank	D. a loan where the repayments are unevenly distributed throughout the life of the loan
5. Fund	E. an amount of money borrowed by an individual or a company
6. Loan	F. amounts of money

II. Put the words in the correct order:

1. The, of, on, to, and, a, its, nature bank, setting, largely, which, according, function, time, vary, central, depends.

2. Loans, as, and, are, irregularly, such, balloon, bullet, repaid.

3. Rate, as, loan, interest, the, is, the, the, in, market, determined, price, equilibrium.

4. “Legal tender”, coins, of, the, in, and, status, notes, have, circulation.

5. Methods, central, banking, objectives, and, widely, commercial, differing, involve, and, functions.

III. Fill in the gaps with the words or word combinations in italics:

Transactions, customer, certified, loan, cheque, cash, cheque, currency, balloon

1. The most common means of payment, particularly for significant sums of money, is the … since it is both safer and more convenient than using … .

2. Central banking is an activity separate from ordinary … banking, because a central bank usually has few … with private customers, dealing primarily with commercial bank and with the national government.

3. If a … wishes to make payments of large amounts of money by … and is not known to the creditor, then he may obtain a “… cheque” from the bank.

4. The hard and the soft … is given by one country to another on condition that the borrower repays it in the lender's … or the borrower's currency.

5. The … loan is a loan where the repayments are unevenly distributed throughout the life of the loan.

IV. Are the following statements true or false? Correct the false ones:

1. Paper money consists of notes issued by commercial banks.

2. Coins and bills of every denomination are called legal tender.

3. Central bank is a bank officially appointed by law to work closely with the government.

4. Commercial banking system is profit motivated.

5. Functions of commercial banks are unlimited.

6. Certified cheques are always guaranteed by a bank.

7. Bills of exchange are now used mainly in foreign trade.

8. The interest rate can't be determined as the equilibrium price in the loan market.

V. Translate the following terms into English:

1. законное платежное средство

2. дорожный чек

3. коммерческий банк

4. выплатить по чеку

5. финансовый агент правительства

6. выпускать банкноты

7. льготный заем

8. заемщик

9. закладная на имущество

10. ссудный процент

TEST 7. (Market Research, Marketing, Consumer Choice)

I. Match the terms with their definitions:

1. Market research	A. relates quantity demanded of one good to its own price
2. Secondary data	B. the process of gaining information about customers, competitors and market trends through collecting primary and secondary data
3. Engel curve	C. maps quantity demanded of one good against changes in income
4. Objects of consumer	D. finding out information from secondary data choice
5. Desk research	E. information which already exists
6. Consumer tastes	F. goods and services, yielding utility which can be ordered and measured
7. Field research	G. the process of collecting primary data
8. Demand curve	H. can be represented by a map of non-intersecting indifference curves
9. Marketing	I. the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organizational objectives.

II. Put the words in the correct order:

1. Prefers, since, the, more, consumer, to, indifference, less, must, downwards, curves, slope.

2. Sale, in, every, a, random, respondent, an, potential, has, of, chance, chosen, equal, being.

3. Reflect, curves, the, indifference, of, principle, a, marginal, diminishing, of, substitution, rate.

4. Can, information, business, which, collect, is, from, sources, available, the, outside, business.

5. Are, goods, if, the, quantity, normal, will, demanded, increase.

6. May, data, collected, primary, be, observation, survey, through, experiment, and.

III. Fill in the gaps with the words or word combinations in italics:

Substitute, accounts, tastes of preferences, equilibrium, budget constraint, primary data, observation, marketing, force, market research

1. The way in which the consumer ranks the alternatives available is called the consumer's … .

2. The consumer's … shows how the upper limit on consumption may be allocated among consumption patterns or goods at given prices.

3. Marketing is a … within the organization that encourages socially and ethically responsible behaviour in the market place.

4. There is little universal agreement on the best or right definition of … .

5. Finding out about what consumers want and need, and what makes them buy, is called … .

6. …will give information about the value of sales and costs of production.

7. …are collected through direct investigation.

8. In a two-good world, a good whose quantity purchased moves together with the changes in the price of the other good is called … .

9. Maximizing consumer utility generates an … where the budget constraint and the highest possible indifference curve are tangential.

10. …can't tell the supermarket anything about why shoppers are behaving in this or that way.

IV. Are the following statements true or false? Correct the false ones:

1. When the product is launched, a carefully researched product stands less chance of failing.

2. Surveys cannot be useful for market research purposes if the questions asked are appropriate.

3. Research involving asking questions of people or organizations is called a questionnaire.

4. Product oriented business develops products which have been researched and designed to meet the needs of consumers.

5. In equilibrium the marginal rate of substitution between goods is equal to their ratio of prices.

6. The cross elasticity of demand measures the proportional change in the quantity demanded of one good to a proportional price of another.

7. The foundation of exchange is creating or adding value for the buyer.

8. To launch a new product is never very costly.

V. Translate the following terms into English:

1. предельная полезность

2. функции маркетинга

3. проводить опрос

4. бороться за покупателей

5. вопросник

6. конкурентные предложения

7. почтовый опрос

8. делать выбор

Part III. Resource Tests

ALTERNATIVE MARKET STRUCTURES

I. Read the text. Some parts of the text have been taken out. These extracts are listed below. Complete each gap with the appropriate extract. One sentence does not belong in any of the gaps.

a) The collective conduct of all the firms in the industry will affect the whole industry's performance.

b) Some industries tend more to the competitive extreme, and thus their performance corresponds to some extend to perfect competition.

c) The price they face is that determined by the interaction of demand and supply in the whole market.

d) The market structure under which a firm operates will determine its behaviour.

e) Each firm is so small relative to the whole industry that it has no power to influence price.

It is traditional to divide industries into categories according to the degree of competition that exists between the firms within the industry. There are four such categories.

At one extreme is perfect competition, where there are very many firms competing. ___ (1) It is a price taker. At the other extreme is monopoly, where there is just one firm in the industry, and hence no competition from within the industry. In the middle comes monopolistic competition, where there are quite a lot of firms competing and where there is freedom for new firms to enter the industry, and oligopoly, where there are only a few firms and where entry for new firms is restricted.

___ (2) Firms under perfect competition will behave quite differently from firms that are monopolists, which will behave differently again from firms under oligopoly and monopolistic competition.

This behaviour (or “conduct”) will in turn affect the firm's performance: its prices, profits, efficiency, etc. In many cases it will also affect other firms' performance: their prices, profits, efficiency, etc. ___ (3)

Economists thus see a causal chain running from market structure to the performance of that industry.

Structure Conduct Performance

First, we shall look at the two extreme market structures: perfect competition and monopoly. Then we shall turn to look at the two intermediate cases of monopolistic competition and oligopoly.

These two intermediate cases are sometimes referred to collectively as imperfect competition. The vast majority of firms in the real world operate under imperfect competition. It is still worth studying the two extreme cases, however, because they provide the framework within which to understand the real world.

___ (4) Other industries tend more to the other extreme: for example, when there is one dominant firm and a few much smaller firms. In such cases, their performance corresponds more to monopoly.

II. For each question 1-4, mark one for the answer you choose.

1. Perfect competition is a market structure

A. where each firm produces a differentiated product.

B. where there is freedom of entry to the industry.

C. in which there are a few firms.

2. Monopoly is a market structure

A. where a unique product is produced.

B. where the firm is a price taker.

C. where there are no restrictions to the entry of new firms.

3. Monopolistic competition is a market structure

A. where there are a few firms.

B. where each firm produces a homogeneous product.

C. where each firm has some control over its price.

4. Oligopoly is a market structure

A. where there are a lot of firms.

B. where there are no barriers to the entry of new firms.

C. where firms produce either an undifferentiated product or a differentiated one.

FREE-MARKET MEDICINE IN RUSSIA

economics monopolies inflation

Is the Patient Recovering?

I. Read the text. Some parts of the text have been taken out. These extracts are listed below. Complete each gap with the appropriate extract. One sentence does not belong in any of the gaps.

a) No longer will the state guarantee employment and a moderate standard of living for all.

b) Many commentators began to wonder whether the economy could escape the slide into “hyperinflation” when money would become virtually worthless.

c) With the virtual abandonment of price controls, prices soared and by the end of 1992 inflation had reached a massive 1354 per cent.

d) Consumer choice decreased, too.

e) Such an impressive reduction in inflation was due largely to government successfully capping its spending.

1. Reforming the old Soviet Union was never going to be easy. To replace central planning with free-markets and enterprise would involve a radical transformation of economic life. But following the rise to power of Boris Yeltsin in Russia in 1991, this is just what was attempted. The following policies were adopted in early 1992:

- Price controls on 90 per cent of items were abolished. But with shortages of most goods, it was hardly surprising that prices rose dramatically.

- Business was given easier access to foreign exchange, and foreign companies were encouraged to invest in Russia.

- The largest privatisation programme in the world was launched. In many of the new private companies, workers were to become the principal shareholders.

These reforms represented a massive shock to the old system. ___ (1) These huge price increases led to falling demand, but the disruption to the economy also led to falling supply. In 1992 output fell by nearly 20 per cent and the purchasing power of wages fell by 40 per cent.

2. The government's budget deficit (the excess of government spending over government tax receipts) rose from 1.5 per cent of national income in the first quarter of 1992 to 15 per cent by the final quarter. Perhaps most significantly, the money supply rose nearly 600 per cent between January and October. ___ (2)

3. Critics argued that the costs of reform were intolerably high. The Russian economy, inherently weak and resistant to change, was unprepared for the radical nature of the policy and as such the reform programme could not be sustained. They highlighted the following weaknesses inherited from the old system:

- Many Russian companies are virtual monopoly producers. If they run into trouble, as many have done, this leads to huge shortages throughout the economy.

- Industry, being used to taking orders from above, has been slow to adapt to economic change and the rigours of the marketplace. Much of it is highly inefficient and wasteful, making a poor use of very scarce resources. Estimates suggest that in 1992 Russia used 15 times as much steel and 6 times as much energy as the USA per unit of national output.

- With the freeing of prices, many firms in a monopoly position simply raised prices and reduced output. That way they could increase profits but with less effort.

Supporters of reform recognised these weaknesses, but maintained that they only strengthened the arguments for changing the old system. In addition, they argued that the reform package of 1991/2 did not go far enough. Price controls on certain goods remained. Price markups in state shops were limited to 25 per cent, oil prices were controlled and imports were subject to a 20 per cent tariff (customs duty).

4. Some supporters of reform argued that an economic slump was the medicine required to drive the old sickness out of the system. It would force inefficient producers out of the market, and the competition for survival would lead to greater productivity and ultimately to long-term prosperity.

5. Four years on, it appeared that the supporters of reform may have been right in their judgements. The Russian economy seemed to have turned the corner. By mid-1996, annual inflation had fallen to 80 per cent. ___ (3) The government's budget deficit was now well within the limits agreed with the International Monetary Fund. The rouble, after a disastrous collapse in 1994, seemed to have stabilised on the foreign exchange market. Output, however, was still falling. In 1995 output fell by 4 per cent. Nevertheless forecasters were predicting growth of upwards of 4 per cent for 1997 onwards.

6. Critics of reform, even in the light of such real gains, still point to the hardship experienced by many Russians. Official unemployment stands at around 8 per cent, with an estimated additional 6 per cent hidden unemployment. In a fifth of all Russian regions, unemployment is over 30 per cent, and in a few over 50 per cent. Those in work have not fared much better. The average real wage fell by some 37 per cent between 1994 and 1996. Many Russians today are faced with severe hardship.

7. Some, the “New Russians”, have become very wealthy-some legitimately, but some through criminal activities (the rise of the Russian Mafia has been a disturbing development). The rise of the wealthy further serves to highlight the growing divide between rich and poor.

8. The old certainties have gone. ___ (4) Today's market system in Russia is one where the strong gain and the weak lose.

II. Look at statements 1-3. In each statement, which phrase or sentence is correct?

1. Imports were subject to a 20 per cent tariff.

A. Prices were controlled.

B. Government set up a 20 per cent tariff.

C. Customs duty was 20 per cent.

2. In a fifth of all Russian regions, unemployment is over 30 per cent.

A. In every fifth region unemployment is 30 per cent.

B. In 20 per cent of all Russian regions unemployment rate exceeded 30 per cent.

C. In a few Russian regions unemployment grew up to 50 per cent.

3. Foreign companies were encouraged to invest in Russia.

A. Many new private companies stimulated investment.

B. Business was given easier access to foreign exchange.

C. The special policy was adopted in early 1992.

III. For each question 1-4, mark one for the answer you choose.

1. It was hardly surprising that prices rose dramatically because

A. 90 per cent of items price were abolished.

B. the purchasing power of wages fell.

C. economy was short of most goods.

2. Price mark-ups in state shops

A. could not exceed 25 per cent.

B. was limited to 20 per cent.

C. equaled 25 per cent.

3. In “hyperinflation” money

A. would be practically worthless.

B. supply would rise dramatically.

C. is inherently weak for the radical nature of the policy.

4. Some of the “New Russians” have become very wealthy -

A. with the rise of the Russian Mafia.

B. either legally or illegally.

C. to highlight the growing divide between rich and poor.

IV. Match each of these statements with one of the paragraphs numbered 1-8.

A. Free-market economy is a medication for central planning system
B. Introduction of reform policies and their effects
C. Counter-arguments against the transformation programme
D. The turning point in the economic disaster

V. Are sentences below “Right” or “Wrong”? If there is not enough information to answer, choose “Doesn't say”.

1. Critics of reform ignored its real gains.

A. Right B. Wrong C. Doesn't say

2. The government's budget deficit rose by 13.5 per cent of national income throughout 1992.

A. Right B. Wrong C. Doesn't say

3. Critics argued that the cost of reform was too high because of the negative comparison with USA national output of steel and energy.

A. Right B. Wrong C. Doesn't say

4. IMF agreed with the government's budget deficit.

A. Right B. Wrong C. Doesn't say

5. Reform supporters strengthened the arguments by requiring to abolish the rest of price controls and enforce competitive producers.

A. Right B. Wrong C. Doesn't say

VI. Complete the following table:

A. President at power in 1991

B. Inflation rate in mid-1996

C. Predicted growth for 1997 onwards

D. Average real wage between 1994 and 1996

E. Maximum inflation rate/when

F. Unofficial unemployment rate

VII. The mistakes in the sentences below have been underlined. Write the corrections in the spaces provided.

1. In 1995 out put had fallen by 4 per cent.

2. In many of the new private companies, principal workers became a shareholders.

3. Four years on, the Russian economy seemed to have being turning the corner.

4. Critics of reform, though in the light of such real gains, still point to the hardship.

5. Such an impressive reduction in inflation was of largely government successfully capped its spending.

1. _____________________________________________

2. _____________________________________________

3. _____________________________________________

4. _____________________________________________

5. _____________________________________________

SHOULD HEALTH CARE PROVISION BE LEFT TO THE MARKET?

1. When you go shopping you may well pay a visit to the chemist and buy a bottle of paracetamol, some sticking plasters or a tube of ointment. These health-care products are being sold through the market system in much the same way as other everyday goods and services such as food, household items and petrol.

But many health-care services and products are not allocated through the market in this way. In the UK, the National Health Service provides free hospital treatment, a free general practitioner service and free prescriptions for certain categories of people (such as pensioners and children). Their marginal cost to the patient is thus zero. Of course, these services use resources and they thus have to be paid for out of taxes. In this sense they are not free. (Have you heard the famous saying “There's no such thing as a free lunch”?)

But why are these services not sold directly to the patient, thereby saving the taxpayer money? Why is considered that certain types of health care should be provided free, whereas food should not? After all, they could both be considered as basic necessities of life.

The advocates of free health-care provision argue that there are a number of fundamental objections to relying on a market system of allocation of health care, many of which do not apply in the case of food, clothing, etc. So what are the reasons why a free market would fail to provide the optimum amount of health care?

2. There is a problem connected with the distribution of income. Because income is unevenly distributed, some people will be able to afford better treatment than others, and the poorest people may not be able to afford treatment at all. On the grounds of equity, therefore, it is argued that health care should be provided free - at least for poor people.

The concept of equity that is usually applied to health care is that of treatment according to medical need rather than according to the ability to pay.

3. If you were suddenly taken ill and required a major operation, or maybe even several, it could be very expensive indeed for you if you had to pay. On the other hand, you may go through life requiring very little if any medical treatment. In other words, there is great uncertainty about your future medical needs. As a result it would be very difficult to plan your finances and budget for possible future medical expenses if you had to pay for treatment. Medical insurance is a possible solution to this problem, but there is still a problem of equity. Would the chronically sick or very old be able to obtain cover, and if so, would the premiums be very high? Would the poor be able to afford the premiums? Also would insurance cover be comprehensive?

4. There is also the problem of externalities. If you are cured of an infectious disease, for example, it is not just you who benefits but also others, since you will not infect them. Also your family and friends benefit from seeing you well; and if you have a job you will be able to get back to work, thus reducing the disruption there. These external benefits of health care could be quite large.

If the sick have to pay the cost of their treatment, they may decide not to be treated - especially if they are poor. They may not take into account the effect that their illness has on other people. The market, by equating private benefits and costs, would produce too little health care.

5. Markets only function well to serve consumer wishes if the consumer has the information to make informed decisions. If you are to buy the right things, you must know what you want and whether the goods you buy meet these wants. In practice, consumers do have pretty good knowledge about the things they buy. For example, when you go to the supermarket you will already have tried most of the items you that buy, and will therefore know how much you like them. Even with new products, provided they are the sort you buy more than once, you can learn from any mistakes.

In the case of health care, “consumers” (i.e. patients) may have very poor knowledge. If you have a pain in your chest, it may be simple muscular strain, or it may be a symptom of heart disease. You rely on the doctor (the supplier of the treatment) to give you the information: to diagnose your condition. Two problems could arise here if there were a market system of allocation health care.

The first is that unscrupulous doctors might advise more expensive treatment than is necessary, or drugs companies might persuade you to buy a more expensive branded product rather than an identical cheaper version.

The second is that patients suffering from the early stages of a serious disease might not consult their doctor until the symptoms become acute, by which time it might be too late to treat the disease, or very expensive to do so. With a free health service, however, there is likely to be an earlier diagnosis of serious conditions. On the other hand, some patients might consult their doctors over trivial complaints.

6. If doctors and hospitals operated in the free market as profit maximisers, it is possible that they would collude to fix standard prices for treatment, so as to protect their incomes.

Even if doctors did compete openly, it is unlikely that consumers would have the information to enable them to “shop around” for the best value. Doctor A may charge less than doctor B, but is the quality of service the same? Simple bedside manner - the thing that may most influence a patient's choice - may be a poor indicator of the doctor's skill and judgment.

7. To argue that the market system will fail to provide an optimal allocation of health-care resources does not in itself prove that free provision is the best alternative. In the USA there is much more reliance on private medical insurance. Only the very poor get free treatment.

Alternatively, the government may simply subsidise the provision of health care, so as to make it cheaper rather than free. This is the case with prescriptions and dental treatment in the UK, where many people have to pay part of the cost of treatment. Also the government can regulate the behaviour of the providers of health care, so as to prevent exploitation of the patient. Thus only people with certain qualifications are allowed to operate as doctors, nurses, pharmacists, etc.

I. Match each of these statements with one of the parts numbered 1-7:

A. Health care generates a number of benefits external to the patient.
B. There are alternative policies open to a government to tackle market failings.
C. It is difficult for people to predict their future medical needs.
D. Patients might be at a disadvantage because of their ignorance.
E. It is unlikely that competition would drive down prices charged by doctors and hospitals.
F. People may not be able to afford treatment.
G. It is important to make a distinction between health care and other products and services allocated through the market.

II. Say whether the following sentences are “Right” or “Wrong”. If there is not enough information to answer, choose “Doesn't say”.

1. The National Health Service provides free medicines for everyone.

A. Right B. Wrong C. Doesn't say

2. Health insurance could solve the problem of planning future medical expenses.

A. Right B. Wrong C. Doesn't say

3. The market would fail to produce sufficient health care by equating public benefits and costs.

A. Right B. Wrong C. Doesn't say

4. With a free health service, more people would consult their doctor at the early stages of a disease.

A. Right B. Wrong C. Doesn't say

5. The US government subsidises the provision of health care.

A. Right B. Wrong C. Doesn't say

III. For each question 1-5, mark one for the answer you choose.

1. The concept of equity applied to health care implies

A. treatment according to the ability to pay.

B. treatment according to social status.

C. treatment according to medical need.

2. The problem with medical insurance is that

A. the poor might not be able to obtain cover.

B. the premiums might be too high for the poor.

C. it might make it difficult for people to plan their budget.

3. If there were a market system of allocating health care,

A. doctors and drugs companies would probably take advantage of patient ignorance.

B. patients would be better informed.

C. patients would be more willing to buy expensive branded products.

4. In the free market

A. doctors' fees would be reduced by competition.

B. doctors might charge standard prices for treatment.

C. price would be an indicator of the doctor's skill.

5. According to the writer, a free health service

A. is sure to provide an optimal allocation of health-care resources.

B. should be restricted to the very poor.

C. is not necessarily the best alternative.

CAN THE MARKET PROVIDE ADEQUATE PROTECTION FOR THE ENVIRONMENT?

___ (1)

In recent years people have become acutely aware of the damage being done to the environment pollution. But if the tipping of chemicals and sewage into the rivers and seas and the spewing of toxic gases into the atmosphere cause so much damage, why does it continue? If we all suffer from these activities, both consumers and producers alike, then why will a pure market system not deal with the problem? After all, a market should respond to people's interests.

___ (2)

The reason is that the costs of pollution are largely external costs. They are borne by society at large and only very slightly (if at all) by the polluter. If, for example, 10 000 people suffer from the smoke from a factory (including the factory owner) then that owner will only bear approximately 1/10 000 of the suffering. That personal cost may be quite insignificant when the owner is deciding whether the factory is profitable. And if the owner lives far away, the personal cost of the pollution will be zero.

Thus the social costs of polluting activities exceed the private costs. If people behave selfishly and only take into account the effect their actions have on themselves, there will be an overproduction of polluting activities.

Thus it is argued that governments must intervene to prevent or regulate pollution, or alternatively to tax the polluting activities or subsidise measures to reduce the pollution.

___ (3)

But if people are purely selfish, why do they buy “green” products? Why do they buy, for, example, “ozone-friendly” aerosols? After all, the amount of damage done to the ozone layer from their own personal use of “non-friendly” aerosols would be absolutely minute. The answer is that many people have a social conscience. They do sometimes take into account the effect their actions have on other people. They are not totally selfish. They like to do their own little bit, however small, towards protecting the environment.

Nevertheless to rely on people's consciences may be a very unsatisfactory method of controlling pollution. In a market environment where people are all the time being encouraged to consume more and more goods and where materialism is the religion of the age, there would have to be a massive shift towards “green thinking” if the market were to be a sufficient answer to the problem of pollution.

___ (4)

Certain types of environment problem may get high priority in the media, like acid rain, the greenhouse effect, damage to the ozone layer and brain damage to children from leaded petrol. However, the sheer range of polluting activities makes reliance on people's awareness of the problems and their social consciences far too arbitrary.

I. Which text reports on these items?

A. Media priority of the environmental problems.

B. Costs of pollution.

C. A market response to the environmental problem.

D. People's selfishness and social responsibility.

II. For each question 1-4, mark one for the answer you choose.

1. A market system should deal with the problem of pollution because

A. consumers suffer from producers' activities.

B. people have become acutely aware of the problem.

C. it should react to people's interests.

2. The costs of pollution

A. are mostly suffered by society.

B. are borne by the polluter.

C. are personal costs of the factory owner.

3. People buy “green” products and “ozone-friendly” aerosols because

A. they are totally selfish.

B. they are aware of the damage they do to the ozone layer from their personal use of “non-friendly” goods.

C. being socially responsible they take into consideration the possible impact of their actions on other people.

4. A very unsuitable way of controlling pollution could be

A. encouraging people to buy more and more goods.

B. organizing “green thinking” propaganda.

C. relying on people's being socially conscious.

III. The mistakes in the sentences below have been underlined. Write the corrections in the spaces provided.

1. Recently people became aware of the damage being done to the environment by pollution.

2. Personal costs may be quite insignificantly when the owner is deciding whether the factory is profitable.