According to the invisible hand theorem, as stated in the text
A)Non-market forces can prevent the markets from guiding consumers to the contract curve
B)An equilibrium produced by competitive markets will exhaust all gains from exchange
C)Government interaction is sometimes needed as an invisible hand to lead the economy toward efficiency
D)Even non-competitive markets are able to achieve Pareto efficient outcomes

Question

Quizplus · Accepted Answer

The invisible hand theorem suggests that competitive markets will inevitably lead to an equilibrium that exhausts all gains from exchange. This means that there will be no opportunities for mutually beneficial trades that are not already happening in the market. Non-market forces, government intervention, and non-competitive markets may prevent the market from reaching this equilibrium, but when the market is truly competitive, it will lead to Pareto efficient outcomes.

According to the Invisible Hand Theorem, as Stated in the Text