If markets are not competitive:
A) prices will still send the correct signal in a free market.
B) the invisible hand does not work perfectly.
C) there will be an ideal balance between industries.
D) there will be significant externalities.

Question

Quizplus · Accepted Answer

The invisible hand, which is the idea that individuals pursuing their own self-interest in a competitive market will lead to an optimal outcome for society as a whole, is based on the assumption of perfect competition. When markets are not competitive, the invisible hand does not work perfectly, and the market may fail to reach an optimal outcome.

If Markets Are Not Competitive