In The Wealth of Nations, Adam Smith mentions that very good grapes could be grown in Scotland. However, growing high quality grapdes in Scotland would be about 30 times as expensive as purchasing grapes from foreign countries. Some nations are better than other at producing things due to the availablity of natural resouces and other factors. With which statement regarding single resource ad diversified economies would Adam Smith most likely agree?

Question

In The Wealth of Nations, Adam Smith mentions that very good grapes could be grown in Scotland. However, growing high quality grapdes in Scotland would be about 30 times as expensive as purchasing grapes from foreign countries. Some nations are better than other at producing things due to the availablity of natural resouces and other factors. With which statement regarding single resource ad diversified economies would Adam Smith most likely agree?

-Nations should export as many different types of goods or services as possible.
-Nations should do their best to produce all goods locally, to minimize the risks associated with dependence on foreign goods.
-A nation should diversify when it can use its resources to produce goods and services more efficiently than other nations.
-Each nations should specialize in producing only the goods or services that it uses.

I those the third choice. I was also thinking about the first one.

Ms. Sue??

Answer 1

Three is correct.

Answer 2

THANKS! I also needed help on this one Ms. Sue! Thanks so much!

Answer 3

Based on the information provided about Adam Smith's ideas in The Wealth of Nations, it is most likely that he would agree with the statement: "A nation should diversify when it can use its resources to produce goods and services more efficiently than other nations."

Adam Smith's economic theory, known as classical economics or laissez-faire economics, emphasized that nations should focus on their comparative advantage in the production of goods and services. In the case of the example you mentioned about Scotland and grapes, it is more efficient for Scotland to purchase grapes from foreign countries because it would be 30 times more expensive to grow grapes locally. Therefore, Scotland should focus on other industries or products where it has a comparative advantage, instead of trying to produce something that can be acquired more efficiently from other nations.

This aligns with the idea of diversification based on comparative advantage. Each nation should specialize in producing the goods or services that it can produce more efficiently than other nations, while importing goods or services that can be obtained more efficiently from abroad. By doing so, nations can maximize their overall economic efficiency and benefit from international trade. So, the third statement is the one that Adam Smith would most likely agree with.