Scottish economist Adam Smiths The Wealth of Nations heralded the mar

Question

Scottish economist Adam Smith’s The Wealth of Nations heralded the market based economic system that has increasingly become the norm since the book’s publication in 1776. Some say that Smith’s magnum opus was to economics as Newton’s Principia Mathematica was to physics or as Darwin’s On the Origin of Species was to biology. Certainly the book made its impact in the western world.

1776 predates wide usage of the term capitalism, now commonly associated with Smith, and which Smith refers to as a “system of natural liberty.” Smith presented what we today consider Economics 101: supply and demand, and the importance of specialization and the division of labor. He also posited that individuals pursuing their own self-interest could unintentionally create a more just society by so doing—an idea sometimes referred to as the “Invisible Hand.”

Even Smith’s critics do not deny the book’s immense influence. Murray Rothbard levels the criticism that  The Wealth of Nations,  in fact, eclipsed public knowledge of all economists—better ones, he says—before Smith.    1 
 1. Which of the following statements is not in contradiction with the opinions of Murray Rothbard as expressed in the passage?

I. Smith was possibly the third best economist of all time.
II.  The Wealth of Nations  should not have been as influential as it was.
III. Adam Smith was not particularly influential.

A. I Only
B. II Only
C. III Only
D. I and II Only
E. II and III Only

2 
 2. Which of the following would be an example of the “Invisible Hand” as described by Adam Smith?

(A) A group of moviegoers who are able to get cheaper tickets for a film by buying their tickets as a group
(B) A society in which the division of labor frees certain people to pursue careers that might seem impractical in a non-capitalist society
(C) A university in which classes are first-come, first-served, thereby equitably distributing courses according to the passion and dedication of students
(D) A market in which there are more buyers than sellers, thus forcing the price of goods upwards
(E) A stock exchange in which each trader acts according to a different set of information, such that certain commodities become hyped and their prices overinflated

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Sajjad1994 · Answer

Official Explanation

2. Which of the following would be an example of the “Invisible Hand” as described by Adam Smith?

Difficulty Level:   700

Explanation

The  “Invisible Hand”  is described as the idea that  individuals pursuing their own self-interest could unintentionally create a more just society.

(A)  is wrong because no one is acting all that selfishly here, nor is the final result particularly just — this would be a better choice if the moviegoers’ actions somehow caused a benefit to people other than themselves.

(B)  is wrong because it has little to do with selfishness or justice, but with another aspect of Smith’s writings.

(C)  is correct because this system promotes selfishness (each student tries to sign up as quickly as possible for each class, without thinking of others), but those classes are then said to be  “equitably distributed.”

(D)  is wrong because raising prices isn’t inherently selfish, no one appears to be competing, and the end result is not particularly just.

(E)  is wrong for the same reasons as (D).

Answer: C

Sajjad1994 · Answer

Official Explanation

1. Which of the following statements is not in contradiction with the opinions of Murray Rothbard as expressed in the passage?

Difficulty Level:   700

Explanation

Statement I  is correct because Rothbard only says that there were better   than Smith. That means that at least two were better than Smith, but Smith could still have been the third best (you certainly don’t know that Rothbard actually thinks that Smith comes in third place, but the question asks for statements that simply do not contradict Rothbard’s remarks).

Statement II  is correct because Rothbard says that Smith’s book  “eclipsed public knowledge”  of better economists, meaning it had influences that it shouldn’t have.

The third statement  is not correct because of the first line of the third paragraph, Even Smith’s critics do not deny the book’s immense influence.

Answer: D

gullyboy09 · Answer

Hi  KarishmaB ,  Bunuel ,  Sajjad1994  in the second question, option C, the university has intentionally set up a "first-come, first-served" rule to distribute classes. This is a deliberate policy designed to achieve a specific version of fairness. The students aren't necessarily competing in a market; they are following a set bureaucratic procedure. To me B looks more appropriate!

guddo · Answer

Scottish economist Adam Smith’s The Wealth of Nations heralded the market based economic system that has increasingly become the norm since the book’s publication in 1776. Some say that Smith’s magnum opus was to economics as Newton’s Principia Mathematica was to physics or as Darwin’s On the Origin of Species was to biology. Certainly the book made its impact in the western world.
 
 1776 predates wide usage of the term capitalism, now commonly associated with Smith, and which Smith refers to as a “system of natural liberty.” Smith presented what we today consider Economics 101: supply and demand, and the importance of specialization and the division of labor. He also posited that individuals pursuing their own self-interest could unintentionally create a more just society by so doing—an idea sometimes referred to as the “Invisible Hand.”
 
 Even Smith’s critics do not deny the book’s immense influence. Murray Rothbard levels the criticism that The Wealth of Nations, in fact, eclipsed public knowledge of all economists—better ones, he says—before Smith. 
 
Which of the following would be an example of the “Invisible Hand” as described by Adam Smith?

The passage’s key idea is that  when individuals pursue their own self-interest, the result can unintentionally be a more just social outcome . So we need the choice where people act for themselves, but the outcome is presented as fairer or more equitable overall.

(A) A group of moviegoers who are able to get cheaper tickets for a film by buying their tickets as a group

This is not the best answer. The benefit goes only to the moviegoers themselves. There is no broader social result, and nothing here suggests a more just outcome for society.

(B) A society in which the division of labor frees certain people to pursue careers that might seem impractical in a non-capitalist society

This is tempting because the passage does discuss specialization and division of labor. But that is a different Smithian idea. This choice does not clearly show individuals pursuing self-interest and thereby unintentionally creating a more just society.

(C) A university in which classes are first-come, first-served, thereby equitably distributing courses according to the passion and dedication of students

This is the best answer. Each student acts in his or her own self-interest, trying to get into desired classes as quickly as possible. But the result is said to be an equitable distribution, which matches the idea that self-interested behavior can unintentionally produce a more just outcome.

(D) A market in which there are more buyers than sellers, thus forcing the price of goods upwards

This is just supply and demand. It does not show a more just social result. In fact, higher prices do not suggest justice here.

(E) A stock exchange in which each trader acts according to a different set of information, such that certain commodities become hyped and their prices overinflated

This is the opposite of the invisible hand as described here. The result is distortion and overpricing, not a more just outcome.

Answer: (C)

Scottish economist Adam Smiths The Wealth of Nations heralded the mar

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Scottish economist Adam Smiths The Wealth of Nations heralded the mar

Prep Toolkit

615 to 715 in 15 Days (Ria's Strategies)

More than Quant/Verbal Abilities: Speed vs. Accuracy

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