Which of the following is true of The Invisible Hand Theorem?
A)Monopoly pricing will not distort efficiency as long as consumers are willing to pay the prices of the monopolists.
B)There can be no taxes of any kind.
C)Any position on the consumer contract curve can be efficient.
D)The slope of the production possibilities curve is not affected by movements along the production contract curve.

Question

Quizplus · Accepted Answer

The Invisible Hand Theorem states that any position on the consumer contract curve can be efficient, which means that the market will allocate resources in a way that maximizes overall welfare. This is because individuals acting in their own self-interest will result in a Pareto efficient outcome, as long as markets are competitive and information is complete. Option A is incorrect because monopolies can distort efficiency by charging high prices and limiting output. Option B is incorrect because taxes can exist in a market economy without necessarily distorting efficiency. Option D is incorrect because movements along the production contract curve can affect the slope of the production possibilities curve, as it represents the trade-off between different goods that can be produced.

Which of the Following Is True of the Invisible Hand