ECONOMICS
CONSUMERS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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the marketplace guiding the self-interests of market participants into promoting general economic well-being.
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the fact that social planners sometimes have to intervene, even in perfectly competitive markets, to make those markets more efficient.
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the equality that results from market forces allocating the goods produced in the market.
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the automatic maximization of consumer surplus in free markets.
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Detailed explanation-1: -The invisible hand is a metaphor for how, in a free market economy, self-interested individuals operate through a system of mutual interdependence. This interdependence incentivizes producers to make what is socially necessary, even though they may care only about their own well-being.
Detailed explanation-2: -The concept of the Invisible Hand was introduced by Smith in the 18th century. It refers to the idea that when parties act or interact, making decisions based on self-interest, unintended benefits are produced for society at large.
Detailed explanation-3: -Answer and Explanation: d. Market power is the instrument with which the invisible hand directs economic activity.
Detailed explanation-4: -Adam Smith used the term “invisible hand” to say that a market economy can function on its own and appear that there is a guiding spirit or plan of resources. He argued that you didn’t need government to decide these things but simply allow people to make their own choices.
Detailed explanation-5: -Examples of the invisible hand concept In the automotive industry, the number of people buying vehicles fluctuates based on the economy’s health. In a healthy economy, the more people looking to buy vehicles means manufacturers proportionally produce more cars to meet that demand.