Adam Smith said, "It is the maxim of every prudent master of a family never to attempt to make at home what it will cost him more to make than to buy. The tailor does not attempt to make his own shoes, but buys them of the shoemaker. The shoemaker does not attempt to make his own clothes, but employs a tailor." Which of the following concepts best illustrates Smith's intent with this statement?
A) comparative advantage
B) incentives matter
C) scarcity
D) production possibilities frontier

Question

Quizplus · Accepted Answer

Smith's statement focuses on the idea of specialization and comparative advantage, where each individual specializes in producing the good or service in which they have a lower opportunity cost. In other words, it is more efficient to buy goods or services from others who can produce them at a lower cost or with higher quality, rather than attempting to produce everything oneself. Smith's example of the tailor and shoemaker highlights how each individual can specialize in their respective skills and trade with each other for mutual benefit.

Adam Smith Said, "It Is the Maxim of Every Prudent