In the Absence of Externalities, the Invisible Hand of the Market

question 23

Multiple Choice

In the absence of externalities, the invisible hand of the market place:

• A) increases the transaction cost of contracting between parties to an exchange
• B) is unable to resolve inherent inefficiencies in the market system
• C) induces people to act in a manner inconsistent with self-interest
• D) leads to a market outcome that maximises total benefit to society

---

Definitions:

Formal Reasoning

The process of thinking logically and systematically about abstract concepts and problems.

Specified Clearly

Described or detailed in a clear and exact manner.

Probability

A measure of the likelihood that an event will occur, often expressed as a number between 0 and 1.

Event

An occurrence or happening, especially one of significance.