Multiple Choice
Which of the following is an example of a normative, as opposed to a positive, statement?
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0. Basic Principles of Economics
Positive and Normative Analysis
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According to Adam Smith, which of the following is NOT considered a legitimate role of government in business?
A
Providing national defense
B
Enforcing contracts
C
Regulating prices in competitive markets
D
Protecting property rights
Verified step by step guidance1
Understand Adam Smith's view on the role of government in business, which primarily includes providing public goods and ensuring the proper functioning of markets.
Identify the legitimate roles of government according to Adam Smith, such as providing national defense, enforcing contracts, and protecting property rights, all of which support market operations.
Recognize that regulating prices in competitive markets is generally not considered a legitimate role by Adam Smith because competitive markets are expected to self-regulate through supply and demand.
Analyze why price regulation in competitive markets might interfere with the natural market equilibrium and reduce efficiency, which Adam Smith argued against.
Conclude that among the options, 'Regulating prices in competitive markets' is NOT a legitimate role of government according to Adam Smith.
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