Question

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

Answer 1

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 nation should specialize in producing only the goods or services that it uses.