Smith argues that American producers cannot compete with foreign producers because wages are lower in foreign countries than in the United States.Smith is
A) advancing the foreign export subsidies argument for protectionism.
B) making the mistake of believing that high wages mean high costs.
C) advancing the antidumping argument for protectionism.
D) making the mistake of believing that productivity is higher in foreign countries than in the United States.
E) none of the above

Question

Quizplus · Accepted Answer

Smith is making the mistake of believing that high wages mean high costs. This is a common misconception because high wages can also mean higher productivity, which offsets the costs. In contrast, lower wages do not necessarily mean lower costs because lower productivity can offset the savings from lower wages.

Smith Argues That American Producers Cannot Compete with Foreign Producers