In the Wealth of Nations, Adam Smith Argued That "The

Multiple Choice

In The Wealth of Nations, Adam Smith argued that "the division of labor [specialization] was limited by the extent of the market."(Bracketed remark added.) Which of the following best explains Smith's argument?

A) Specialization and the firm's moving down its average total cost curve requires that the demand facing the firm is sufficiently large.
B) Specialization and the firm's moving down its average total cost curve requires the firm to have increasing marginal costs.
C) Specialization and the firm moving down its average total cost curve requires the government to grant firm's legal monopolies.
D) Specialization and the firm moving down its average total cost curve will lead to the firm realizing economic losses.