Question

The excerpt below is from Adam Smith’s The Wealth of Nations. Which of his economic philosophies can be seen in modern free enterprise systems?

It is natural that what is usually the produce of two days' or two hours' labor, should be worth double of what is usually the produce of one day's or one hour's labor. If the one species of labor should be more severe than the other, some allowance will naturally be made for this superior hardship; and the produce of one hour's labor in the one way may frequently exchange for that of two hours' labor in the other. . . . In exchanging the complete m

Answer 1

The excerpt below is from Adam Smith’s The Wealth of Nations. Which of his economic philosophies can be seen in modern free enterprise systems?

It is natural that what is usually the produce of two days' or two hours' labor, should be worth double of what is usually the produce of one day's or one hour's labor. If the one species of labor should be more severe than the other, some allowance will naturally be made for this superior hardship; and the produce of one hour's labor in the one way may frequently exchange for that of two hours' labor in the other. . . . In exchanging the complete manufacture either for money, for labor, or for other goods, over and above what may be sufficient to pay the price of the materials, and the wages of the workmen, something must be given for the profits of the undertaker of the work who hazards his stock in this adventure. The value which the workmen add to the materials, therefore, resolves itself in this ease into two parts, of which the one pays their wages, the other the profits of their employer upon the whole stock of materials and wages which he advanced. . . . 1

1. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (London: Methuen & Co., Ltd., 1904), Book I: Chapter VII, Book IV: Chapter IX, http://www.econlib.org/library/Smith/smWNCover.html.

A. Nations practicing capitalism allow workers to be paid according to the value of their work in the marketplace.
B. The free enterprise system requires a government-regulated minimum wage to ensure fairness to workers.
C. Social welfare programs in industrialized nations help low-wage workers stay competitive in the marketplace.
D. The practice of socialism ensures that workers are paid equally despite the type of work they do.

Answer 2

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