ACT Reading Practice Test 64: Social Science - Adam Smith and the "Invisible Hand" Doctrine

DIRECTIONS: Each passage is followed by several questions. After reading a passage, choose the best answer to each question and fill in the corresponding oval on your answer document. You may refer to the passages as often as necessary.

1. As it is used in the passage (lines 44–45), the phrase magnum opus most nearly means:

A. crowning achievement.
B. manuscript.
C. attitude.
D. community improvement.

2. According to the passage, the main focus of Smith's "invisible hand" theory is:

F. community.
G. self-interest.
H. society.
J. benevolence.

3. According to the description of the "invisible hand" theory in the passage, what would happen in the market if there were a shortage of a product?

A. Stock of the product would be reduced.
B. The price of the product would rise.
C. The product would become more profitable.
D. The public would have little incentive to purchase the product.

4. According to the information presented in the passage, which of the following best describes Adam Smith's view of the relationship between a baker and the community?

F. The baker bakes bread to increase his wealth and also because the community desires bread.
G. The baker values his trade as a baker; the community members value their own personal wealth.
H. The baker and the community both see money as the key commodity in any mercantile transaction.
J. The baker bakes in order to increase his wealth; the community members value the baker's bread more than their money.

5. All of the following are assertions made of Smith's Wealth of Nations EXCEPT:

A. people naturally base their actions on what will be most beneficial to themselves.
B. markets adjust to change naturally, without assistance from the government.
C. the natural prices of objects should include profuse amounts of profit.
D. all transactions that occur have some benefit to each party involved in the transaction.

6. Which of the following is a basis upon which some criticize Smith's Wealth of Nations?

F. Market prices should not include profit.
G. Commercial transactions need to benefit both participants.
H. Falling market prices reduce the stock of products that have excess production.
J. Exorbitant self-interest is unethical.

7. It can be inferred that the word benevolence, as it is used in line 6, primarily refers to:

A. a penchant for performing generous acts.
B. formal or obligatory politeness.
C. having a stubborn disposition.
D. the requisite giving of payments or gifts.

8. It can be inferred from Smith's quotation at the end of the passage (He intends … intention.) that Smith believes that:

F. people do not want an invisible hand controlling their actions.
G. the invisible hand deters people from following their selfish interests.
H. individuals acting selfishly can unwittingly create an outcome that is beneficial to others.
J. no single person intends to be selfish, but every person is.

9. As described in the passage, Smith's theory of "natural price" is vital to the theory of:

A. charitable organizations.
B. self-interest, without regard to community service.
C. laissez-faire economics.
D. mercantile transactions absent of fraud.

10. Based on the passage as a whole, which of the following would most likely approximate Smith's views on competition in the marketplace?

F. Competition is a good thing because it keeps prices for goods and services low for the consumer.
G. The government should try to eliminate competition because people make purchases based on self-interest.
H. Competition is positive, for it causes profit margins to increase and thereby increases market prices.
J. The government should foster competition in order to boost the country's economy in times of recession.