According to Adam Smith

question 173

Multiple Choice

According to Adam Smith

• A)government intervention in markets is not desirable because an invisible hand leads decisions made in pursuit of self-interest to unintentionally promote the social interest.
• B)in a market transaction buyers can either get what they want for less than they would be willing to pay or sellers can make a profit,but both buyers and sellers can't gain simultaneously.
• C)politicians are well-equipped to regulate corporations and intervene in markets to improve market outcomes.
• D)when big corporations pursue their self-interest of maximum profit,they will inevitably conflict with social interest.
• E)the self-interest and the social interest never conflict.

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Definitions:

CAPM

Capital asset pricing model. A statistical model of the investment world aimed at explaining how required returns are determined in financial markets and thereby how stock prices are set. Also see SML.

Risk-Free Interest

The return on investment with no risk of financial loss, typically associated with government bonds.

Firm's Beta

A measure of a stock's volatility in relation to the overall market, indicating the stock's risk level.

Transaction Costs

Expenses incurred when buying or selling goods and services, which can include fees, taxes, and other charges.