Under capitalism, the argument goes, it’s every man for himself. Through the relentless pursuit of self-interest, everyone benefits, as if an invisible hand were guiding each of us toward the common good. Everyone should accordingly try to get as much as they can, not only for their goods but also for their labour. Whatever the market price is, in turn, what the buyer should pay. Just like the idea that there should be a minimum wage, the idea that there should be a maximum wage seems to undermine the very freedom that the free market is supposed to guarantee.
This view, however, has some dramatic consequences. One is the explosion in economic inequality that almost all liberal capitalist democracies have experienced over the past 30-40 years. The difference between the top and the bottom of the income distribution now lies about where it did in the Gilded Age and the roaring 1920s, up until the Great Depression. Unlike these earlier periods, however, this rise in economic inequality has not been driven by returns on capital assets. This time, one of the most important contributors to the rise has been the payment of extraordinarily high levels of compensation to corporate executives... More troubling still, while the compensation for corporate executives has been almost continually rising during this period, real (inflation-adjusted) wages for almost everybody else have been stagnating.
Many people find this upsetting but, even so, they tend to treat it as something capitalism requires us to tolerate. Others think it is something that capitalism requires us to applaud. But nothing in capitalism actually says that such sky-high levels of compensation are permissible. What capitalism says instead is that people need incentives to be maximally productive. But will someone who makes $\$$100 million a year really work harder than someone who makes $\$$10 million? Compensation, like everything else, has what economists call ‘diminishing marginal utility’. More of it has less and less of an incentivising effect, until eventually it has no incentivising effect at all – people are already working as hard as they can. At which point capitalism suggests that we should not pay someone even more money, for we are going to get nothing in return.
But wait – aren’t CEOs just getting paid the market rate for their labour? Their compensation is calculated according to a formula set when they were hired and, as long as this formula represents the going wage, then this is what they should receive. The market rate for CEO labour, however, is not set in a competitive manner. The formula is set by a special group of the company’s directors, called the ‘compensation committee’…
Next time someone hires a CEO and another compensation committee conducts a survey, the average will be higher. The market is not bidding up the price; the price is going up simply because everyone always wants to beat the current average. We have what economists call a market failure. Setting a maximum wage would therefore not interfere with market freedom because, in this instance, the market is not working.

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In the first paragraph, the author puts forth the view that:

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The Correct Option is B

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The author ascribes the increasing gap in economic levels in recent times to:

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The Correct Option is B

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The writer argues that while salaries tend to be capped as people cannot work any harder,

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The Correct Option is B

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We can infer from the sentence on the Gilded Age and the Great Depression (in the 1920s) that:

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The Correct Option is A

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The author concludes there is “a market failure” in the remunerations of top executives (last paragraph) as:

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The Correct Option is B

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