In Markets, the Invisible Hand Allocates Resources Efficiently

question 305

Multiple Choice

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.

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Definitions:

Callable Bonds

Bonds that are subject to redemption (buy back) at a stated dollar amount prior to maturity at the option of the issuer.

Common Stock

Shares of ownership in a corporation, giving holders voting rights and a portion of the company's profits through dividends.

Convertible Bonds

Bonds that can be converted into a predetermined number of the issuing company's shares at certain times during the bond's life, usually at the discretion of the bondholder.

Interest

The cost of borrowing money, represented as a percentage of the principal, paid by the borrower to the lender for the use of the funds.