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 states that, under certain conditions, an equilibrium produced by competitive markets will be Pareto efficient and will exhaust all gains from exchange. This means that there is no other allocation that will make some people better off without making others worse off. Option A is incorrect as non-market forces cannot prevent the markets from guiding consumers to the contract curve. Option C is incorrect as the government intervention is not needed for the invisible hand to lead the economy towards efficiency. Option D is incorrect as non-competitive markets generally result in market power and inefficiencies.

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