In markets, the invisible hand allocates resources efficiently
A)in all cases.
B)when the buyers and sellers are the only interested parties.
C)when there are positive externalities, but not when there are negative externalities.
D)when there are negative externalities, but not when there are positive externalities.

Question

Quizplus · Accepted Answer

The invisible hand of the market allocates resources efficiently when buyers and sellers are the only interested parties. However, if there are positive or negative externalities involved, the market may not allocate resources efficiently. Positive externalities occur when a third party benefits from the transaction, whereas negative externalities occur when a third party is harmed by the transaction. In such cases, government intervention may be required to achieve efficient resource allocation.

In Markets, the Invisible Hand Allocates Resources Efficiently