Question

1. Consider Adam Smith and his views

a) In Ancient Rome, senators such as Cicero were concerned about the large quantities of silver

leaving the Roman Empire as the Roman rich bought huge quantities of silk from the East. What

would Smith argue to try to diminish Cicero’s fears?

b) To what extent does the division of labor and exchange reinforce one another?

c) Why would Smith generally argue against tariffs? (Don’t just say that tariffs are bad but

explain their problems.)

d) If someone believed that certain industries (perhaps manufacturing) created positive

externalities then why might this person disagree with Smith regarding tariffs and trade?

e) How do prices help “The Invisible Hand” to benefit society?

Answer 1

Solution:

A) Ciero were concerned about his wealth whi;e leaving the country beacuase in roam in that days no one wants to buy a silver they only wants to do trade in silk.roman rich people wants to do trade only in silk from the east so that's why smith argued to ciero that he should convert all his wealth in that commodity which is tradeable in those days.

b)Divisiomn of labour-Division of Labour means that the main process of production is split up into many simple parts and each part is taken by different workers who are specialised in the production of that specific part..

reinforcement-Power, examined within a reinforcement exchange model, is proposed as an essential dynamism through which program evaluation is mounted, executed, and utilized. The ability of the program evaluator to influence or control the policies or operations of the evaluatee depends chiefly on an exchange of behaviors which nets all participants of the evaluation interaction a fair and sufficient “payoff” in terms of contingent reinforcement

As it is the power of exchanging that gives occasion to the division of labour, so the extent of this division must always be limited by the extent of that power, or, in other words, by the extent of the market. When the market is very small, no person can have any encouragement to dedicate himself entirely to one employment, for want of the power to exchange all that surplus part of the produce of his own labour, which is over and above his own consumption, for such parts of the produce of other men’s labour as he has occasion for..basically division of work & enforcemet are inter related to each oher as they both work togethjer & remove the difference of rich & poor.

c)Here Smith is saying that a greater ability to transact with one another—across a community or across the globe—makes for a greater ability to specialize in any particular task. Specialization allows us to produce more goods and services with less time, effort, and raw materials, and a bigger market gives us more people to trade those goods and services with in exchange for our wants and needs. In general it can be concluded by adam smith's words that teriffs makes a country poorer.

d) while  certain industries (perhaps manufacturing) created positive externalities then it enjoys to trade with in the country as it attains this due to his monopoly condition in the country but if free trade opens then competiting firms may enter which further can harm the profitiblity of the existing firm. that is why the firm with positive externality favours the teriff barriers on trade with foriegn firms to restrict open trade.

e) the price level helps the society to earn well to fullfill all of their needs and it is believed that inflation in the country is good and helps in enhancing the growth rate, while with subsidiezed price people become lazy to earn more and to grow. they start spending more time in rest rather to work. there for the price level helps the society to develop and to work hard to earn good level of livelihood.