Q6. Adam Smith鈥檚鈥渋nvisible hand... [FREE SOLUTION]

Chapter 1: Q6. (page 12)

Adam Smith鈥檚鈥渋nvisible hand鈥� refers to:
The subtle and often hidden methods that businesses use to profit at customers鈥� expense.
The ability of free markets to reach desirable outcomes, despite the self-interest of market participants.
The ability of government regulation to benefit consumers even if the consumers are unaware of the regulations.
The way in which producers or consumers in unregulated markets expose costs on innocent bystanders.

Short Answer

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Option B) is the correct answer.

Step by step solution

Explanation for the correct answer B

Adam Smith鈥檚 invisible hand emphasizes how the market forces align the self-interest of individual participants to reach an equilibrium state that is desirable by both producers and consumers. This is achieved as long as the market forces are free to work, a free-market case.

For example, the demand and supply in the agriculture market decide the prices and quantity of different crops.

Reason for incorrect option A

Adam Smith鈥檚 invisible hand is based on the free market and is beyond the control of businesses. Thus, companies can not earn profits at customers鈥� expenses. They can control the supply but not the demand for their goods.

Reason for incorrect option C

Adam Smith鈥檚 invisible hand is a free market concept with no government intervention.Thus, government regulation can not be associated with this.

Reason for incorrect option D

Adam Smith鈥檚 invisible hand refers to the free market exchange of goods and services. The concept of exposing cost to bystanders is related to the negative externality effect of producing a good or service above the market equilibrium level (as determined by the invisible hand).