Smith argues that American producers cannot compete with foreign producers because wages are lower in foreign countries than in the United States. Smith is

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Quizplus · Accepted Answer

Smith is making the mistake of believing that high wages mean high costs. This is a common misconception as it ignores the role of productivity, technology, and other factors that can lower costs in a country with high wages. Foreign producers may have lower wages but they may also have lower productivity, higher transportation costs, and other factors that make their products less competitive than American products. Therefore, focusing only on wages to explain the competitiveness of American producers is simplistic and inaccurate.

Smith Argues That American Producers Cannot Compete with Foreign Producers