Adam Smith-Review Questions
According to Smith, what effect does government intervention have on the free market system?
According to Smith, government intervention destroys the market system's natural ability to regualte itself
According to Smith, what effect does a monopoly have on the free market system?
According to Smith, the formation of monopolies destroys competition. W/o competition, the market cannot operate in the best interest of the society
According to Smith, what determines the value of commodity in a free market system?
According to Smith, the labor that goes into the production of the commodity determines the value of a commodity in a free market system
According to Smith, what are the three laws of economics?
According to Smith, the three laws of economics are self-interest, competition, and accumulation
The division of labor makes each individual independent of others for both the necessities and the luxuries of life
False
Why did Smith believe individuals pursued work that would satisfy the demands of society?
Smith believed individuals pursued work that would satisfy the demands of society because of self-interest
How did Smith believe human beings gained moral knowledge?
Smith believed that human beings gained moral knowledge from rational thinking and conscience
What did Smith think would happen if the free market system was left alone?
Smith believed that if the free market system was left alone, society will continually improve
What did Smith believe was the role of competition in a market system?
Smith believed that the role of competition in a market system is to keep the prices, the quantity, and the quality of products at a level satisfactory to the marketplace
What role did Smith think the government should play in society?
Smith believed that, in society, the government should provide for the defedence of the nation, keep the society secure by administering justice, and should maintain public work
What did Smith think was the natural result of self-interest?
Smith believed thta the natural result of self-interest was competition
What idea did Smith promote in The Theory of Moral Sentiments?
Smith promoted the idea that empathy was the basis for moral principles
What is the "invisible hand"?
The "invisible hand" is competition
What is the title of Smith's book outlining his economic ideas?
The Wealth of Nations is Smith's book outlining his economic ideas
What is the Law of Accumulation?
The law of accumulation is when the capitalists accumulate profits that can be invested in the production of more and better products. All of society therefore benefits from the profits of the capitalists.
A division of labor allows individuals to produce distinct products
True
All of society benefits from the accumulation of wealth
True
Human beings are creatures of self-interest motivated by a desire for wealth
True
In a free market system each individual is free to choose the place, the amount, and the kind of work that most satisfies personal needs and desires
True
No society can truly be happy when too many people are poor
True