Question

According to Adam Smith, productivity gains could be brought about through .

• A. Factor-price equalization.
• B. Labor-intensive production.
• C. Protectionism
• D. Technological innovation

Hint:

Recall what Adam Smith said division of labor leads workers to invent.

Answer 1

The Correct Option is D

Step 1: In The Wealth of Nations, Adam Smith explained that dividing work into smaller specialized tasks lets workers become faster and more skilled at their part of the job. Step 2: Smith also noted that this division of labor pushes workers and firms to invent tools and machines that make repetitive tasks easier, which is technological innovation. Step 3: Factor-price equalization and protectionism are later trade-theory ideas, not part of Smith's productivity argument, and labor-intensive production on its own does not raise output per worker. So the productivity gains Smith described come through technological innovation.