According to the Invisible Hand Principle, Competitive Markets Generally

question 161

Multiple Choice

According to the invisible hand principle, competitive markets generally

• A) bring the self-interest of individuals into harmony with the efficient allocation of resources, even though centralized planning of economic activities is absent.
• B) bring the self-interest of individuals into harmony with the efficient allocation of resources when the behavior of individuals is directed by democratic centralized planning.
• C) require central direction; otherwise, the actions of self-interested individuals will conflict with the general interests of society.
• D) promote the economic welfare of self-interested producers at the expense of unorganized groups such as consumers and taxpayers.

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Definitions:

Production Function

A Production Function describes the relationship between inputs used in production and the output resulting from their use, showing how output changes as inputs change.

Output Levels

Refers to the quantity of goods or services produced by a company or economy over a certain period.

Returns to Scale

The rate at which production output increases as a result of a proportional increase in all inputs.

Isoquants

Curves that represent combinations of different inputs that yield the same output, used in production theory to analyze input choices.