Which of the following statements would Adam Smith most likely agree with —

A. The government should redistribute some money from really wealthy industrialists to the poor.
Incorrect. The pure free enterprise system of Adam Smith has winners and losers and no provision for redistribution of wealth.

B. An individual pursuing his or her own self interest will lead to the wealthiest society.
Correct! The free enterprise system of Adam Smith argues that individuals pursuing their own self-interest will create the maximally efficient use of scarce resources.

C. The people who make the most money should be those that perform the most objectively useful services, like teachers and police officers.
Incorrect. Adam Smith believed that the market, supply and demand, should determine wages and wealth.

D. If prices for important goods like milk become too high, then the government should require it to be lowered to make it affordable for mothers with small children.
Incorrect. Adam Smith believed that the free market should set the price of a good like milk.

What natural law(s) did Adam Smith say should govern the economy?

A. Supply and Demand
Incorrect. This is only partly correct.

B. Mercantilism
Incorrect. Adam Smith did not believe mercantilism was a good system.

C. The law of competition
Incorrect. This is only partly correct.

D. Both A and C
Correct! The Law of Supply and Demand is linked to the Law of Competition and cannot be separated.

Mercantilism states —

A. the world has limited wealth
Correct! This is what mercantilists believed but Adam Smith and others disagreed.

B. the world has limited wealth and there is no way to become wealthier
Incorrect. Mercantilists believed wealth could be obtained from others.

C. the world’s wealth is unlimited so governments should regulate it
Incorrect. This is closer to what John Stuart Mill believed.

D. the world’s wealth is unlimited and natural law should govern the economy
Incorrect.This was what Adam Smith believed.

Unregulated economies lead to —

A. fair working conditions
Incorrect. If there are no regulations, employers often take advantage of their workers.

B. Social Darwinism
Correct! This is the idea that the strongest businesses will survive and inefficient businesses will die out.

C. honest and fair competition
Incorrect. Businesses that are unregulated often set higher prices than normal and even lie to the public about their products.

D. more consumer choices
Incorrect. Consumers often have fewer choices as businesses often divide the market to benefit themselves.