More than 200 years ago, Adam Smith argued that the wealth of nations depends on gains from (a)

specialization and trade,

(b) expanding the size of the market, and

(c) discovering better (more productive) ways of doing things. Explain why you either agree or disagree with Smith’s view.

*5. Why is competition important for the efficient use of resources? What must a firm do in order to compete effectively? Competitive forces often result in firms being driven out of business. How does this

“business failure” influence the growth of income?