1. Which of the following is not one of Adam Smith's duties of government?
(a) protection of members of society who are not responsible, such as children
(b) correct for third party effects
(c) administration of justice
(d) protect members from coercion

2. Some people support tariffs because they think that tariffs:
(a) result in increased efficiency
(b) lower prices
(c) offer protection for consumer
(d) create jobs

3. According to Friedman, the former Soviet economy was based on:
(a) none of the above
(b) voluntary cooperation
(c) free markets
(d) command

4. Interested sophistry refers to:
(a) the knowledge of consumers
(b) a new marketing tool
(c) buy cheap and selling high
(d) a new production technique

5. A tariff implemented to raise employment in the domestic nation:
(a) has no effect on employment
(b) benefits all consumers
(c) benefits all workers
(d) lowers employment in the foreign nation

Short Answer Questions

1. The price system functions in such a way that each individual acting in his own best interests, makes everyone better off. This concept is known as the:

2. The only kind of capital:

3. What kind of international trade is best?

4. Which of the following is not a function of the price system:

5. Free trade takes place when:

(see the answer key)

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