PT138.S1.P3.Q18

PrepTest 138 - Section 1 - Passage 3 - Question 18

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P1

David Warsh's book describes a great contradiction inherent in economic theory since 1776, when Adam Smith published . ███ ██████ ██ ████████ █████ █████ ██ ███ ████████ ███████ ███ ███ ███████ ███ ███ █████████ █████

Intro topic · Warsh's book about conflict between Pin Factory and Invisible Hand
Conflict was part of economic theory since Adam Smith's Wealth of Nations.
P2

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Pin Factory · Increased efficiency through increased size
Pin factory's employees can make more by specializing on narrow tasks.
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Invisible Hand · Acting out of self-interest can lead to common good
P3

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Conflict · Increasing returns from scale (Pin factory) leads to monopoly, which means Invisible Hand doesn't work
Invisible Hand requires many competitors in an industry.
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Assumption underlying idea that free markets always get it right · Returns to scale are diminishing, not increasing
This assumption is the opposite of the Pin Factory model.
P4

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Why Pin Factory was de-emphasized · The model of diminishing returns was easier to represent mathematically
The Pin Factory model was more difficult to represent mathematically.
P5

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Pin Factory now mainstream · Once it could be described with enough math rigor, Pin factory entered mainstream
Passage Style
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18.

It can be inferred from ███ ███████ ████ ███ ███ ███████ █████ █████ ████████ ██ ██ ██ ████████████ ██████ ███████████████ ████████ ██ ███ ████████ ████ ██ ███ ███

a

the fact that █████████ ███ ██████ ████ █ ██████████ ████ ██████████ ███████████

The scientific aspirations of economics are actually what led economists to de-emphasize the Pin Factory.

1%
b

David Warsh's analysis ██ ███ ████ ██ ████ █████

The author never connects Warsh’s analysis of Smith with why the Pin Factory came into mainstream economic thought.

1%
c

economists' success in ████████████ ███ ███ ███████ █████ ████ ████████████ █████

The author tells us that the Pin Factory became part of mainstream economic thought after economists “had finally found ways to describe the Pin Factory with the rigor needed to make it respectable.” In addition, P4 tells us that the Pin Factory had been de-emphasized up until that point because it was difficult to represent mathematically. This suggests that the Pin Factory model would have continued to remain underground if it hadn’t been successfully represented with enough mathematical rigor.

94%
d

a sudden increase ██ ███ ████████ ██ ████ ██████████ ██████ ████████

The author never suggests there was a “sudden increase” in the tendency toward monopoly.

2%
e

a lowering of ███ █████████ ████ ██ ██████████ ██ ██████ ████████ ██████

The author never suggests anyone lowered their standards. The reason the Pin Factory came into the mainstream is that economists were finally able to model it with sufficient mathematical rigor.

1%

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