Final answer:
Adam Smith preferred capitalism to mercantilism as he believed in minimal government intervention, letting supply and demand regulate the markets, which leads to mutual benefits, competition, and lower prices.
Step-by-step explanation:
Adam Smith thought that capitalism was superior to mercantilism for several reasons. Smith believed that mercantilism, with its focus on building a nation's power by increasing trade to maximize exports and store precious metals, involved too much government intervention, including policies such as tariffs, monopolies, and industry subsidies. These practices, he argued, led to inflation and were harmful to consumers. In contrast, capitalism, as advocated by Smith, is an economic system where private individuals and companies own the means of production and markets are free and unregulated.
According to Smith's view, this would lead to a healthier economy because competition among producers and the forces of supply and demand would naturally regulate the markets, benefitting all participants through lower prices and higher-quality goods and services. Additionally, Smith rejected the idea that wealth was a zero-sum game, asserting that trade could be mutually beneficial and that nations could prosper without government regulation distorting the markets.