Final answer:
The correct answer is False. The statement that Adam Smith argued for greater support in developing foreign markets, given equal profits between domestic and foreign trade, is FALSE. Smith believed in the natural preference for domestic investment and advocated for free trade based on comparative advantages, while criticizing mercantilism and slavery for being inefficient.
Step-by-step explanation:
Adam Smith's Stance on Domestic vs. Foreign Trade
Answering the question: In Smith's Wealth of Nations, he makes the argument that given equal profits between domestic and foreign trade, a merchant is likely to put his greatest support into developing the foreign market. This statement is FALSE. Adam Smith, in fact, posited that merchants would naturally prefer to invest domestically rather than in foreign trade due to perceived risks and the familiarity of their own country. He suggested that this inclination towards domestic investment would support the national economy. Smith also emphasized the importance of free trade and the principle of comparative advantage, where countries would benefit from producing goods they can make most efficiently.
Smith critiqued mercantilism for its emphasis on government regulation and pursuit of favorable trade balances through tariffs and subsidies, instead advocating for an economic system guided by competition and market forces. He envisioned a mutually beneficial global trade environment, where wealth can be created through the specialization and exchange of goods. Smith's ideas contributed to the shift in economic policies from mercantilism towards free-market capitalism, influencing trade regulations and relations among nations.
Moreover, Smith's analysis extends beyond markets into the societal impacts of economic practices, including his criticism of slavery as an inefficient labor system. He noted that free labor would lead to cheaper production costs compared to maintaining enslaved people. His work paved the way for economic thought that championed free markets and opposed restrictive trade practices for the collective benefit.