Adam Smith's Economic Theory Quiz

A market where numerous businesses compete for customers by offering similar products or services, leading to innovation and improvements due to companies seeking to gain an advantage.

When resources are allocated to industries with high growth potential, like biotechnology or artificial intelligence, promoting economic development.

The concept that countries benefit from specializing in producing goods they can make most efficiently and trading with other countries for goods they are less efficient at producing.

The US, excelling in technology and high-tech products, trades with Vietnam, which is efficient at producing textiles and clothing, due to its lower labor costs.

When countries specialize in producing goods based on their comparative advantage, it leads to lower prices and a wider variety of goods for both countries involved in the trade.

The theory, presented in The Wealth of Nations, that emphasizes the role of free markets, individual self-interest, and specialization of labor in driving economic growth. It suggests that the pursuit of self-interest, guided by an 'invisible hand', will ultimately lead to a prosperous society.

The idea that the free market, without government interference, is the most efficient way to allocate resources and promote economic growth. It suggests that individuals pursuing their own self-interest will ultimately benefit society as a whole.

The division of labor, or specialization, allows individuals and businesses to focus on specific tasks and industries. This leads to increased productivity and efficiency, ultimately driving economic growth.

A process where individuals or organizations focus on producing a specific good or service, becoming experts in their field. This specialization leads to increased efficiency, quality, and innovation.

The pursuit of one's own economic interests, often driven by the desire for profit or personal gain. It is considered a key driver in Adam Smith's theory, leading to competition and innovation.