Which of the following are conditions that bind the invisible hand?
A)All goods must be produced efficiently by perfectly competitive firms.
B)All goods must be private goods.
C)No externalities like pollution.
D)Consumers and firms must be fully informed about the prices and goods they buy and sell.
E)All of the above.

Question

Quizplus · Accepted Answer

The conditions that bind the invisible hand include A, B, C, and D. If any of these conditions are not met, the invisible hand will not cause the market to achieve the most efficient allocation of resources. For example, if there are externalities like pollution, the market will not lead to the optimal outcome without government intervention. Similarly, if consumers and firms are not fully informed, the market may not produce the most efficient outcome. Therefore, all of the above conditions are necessary to bind the invisible hand.

Which of the Following Are Conditions That Bind the Invisible