When the "Invisible Hand" Guides Economic Activity, Prices of Products

question 292

Multiple Choice

When the "invisible hand" guides economic activity, prices of products reflect

• A) only the values that society places on those products.
• B) only the costs to society of producing those products.
• C) both the values that society places on those products and the costs to society of producing those products.
• D) none of the above; when the "invisible hand" guides economic activity, prices of products are set by the government in a manner that is thought to be "fair."

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Definitions:

Surplus

An excess of production or supply over demand, often leading to a decrease in prices.

Shortage

A situation where the demand for a product exceeds the available supply, often leading to higher prices.

Equilibrium

The state in which market supply and demand balance each other, and as a result, prices become stable.

Shortage

A situation in which the demand for a product or service exceeds the available supply, often leading to higher prices or unmet demand in the market.