Question

Which explanation accurately describes Adam Smith's concept of the "natural

price"?
O
A. The price of any item that is less than costs of producing it
O
B. The price of any item that is equal to its market price
O
C. The price of any item that is less than its market price
O
D. The price of any item that is equal to the costs of producing it

Answer 1

The answer is D.

Explanation:

Answer 2

D describes the concept of natural price accurately

Explanation:

Adam Smith said that the natural price is the price which covers all the costs to produce it for instance, rent of land, wages of labour, cost of machinery.

A. The price of any item that is less than costs of producing it

This is incorrect since natural price covers all costs of production,

B. The price of any item that is equal to its market price.

C. The price of any item that is less than its market price

Both B and C are incorrect because market price is determined by the forces of demand and supply and changes accordingly whereas the natural price is the everyday normal price.

D. The price of any item that is equal to the costs of producing it.

This is correct because the natural price covers all costs involved in producing a product and is neither low nor high.

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