Why Is the Image of the "Invisible Hand" in Adam

question 12

Multiple Choice

Why is the image of the "invisible hand" in Adam Smith's analysis of capitalism said to be misleading?

• A) For markets to function properly, rules must be enforced by the state when violated.
• B) For markets to function properly, entrepreneurs must be admitted by lottery drawing.
• C) For markets to function properly, competition must be enforced by contractual exchanges.
• D) For markets to function properly, contractual exchanges must be enforced by historical precedents.

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Definitions:

Safety Inventory

Extra stock kept on hand to guard against uncertainty in demand or supply and prevent stockouts.

Uncertain Demand

Refers to situations where future customer demand for a product or service is unclear or difficult to predict.

Losing Sales

The phenomenon of experiencing a decrease in the number of sales transactions or revenue, often as a result of competition, market shifts, or other external factors.

Seasonal Inventory

Goods or materials stocked in anticipation of seasonal demand variations.