How is the self-interest of the participants in an economy guided into promoting general economic self-interest?
A) by the invisible hand
B) by market power
C) by government intervention
D) by property rights

Question

Quizplus · Accepted Answer

The invisible hand is a concept introduced by Adam Smith that suggests that in a free market economy, participants pursuing their own self-interests will ultimately lead to the promotion of general economic self-interest. The market price mechanism works as an invisible hand that directs economic resources to their most valued uses. Therefore, the best choice is A. Market power refers to the ability of a firm or group of firms to influence the price or quantity of goods or services in the market and is not a reliable means of promoting general economic self-interest. Government intervention can be useful in correcting market failures or addressing externalities, but it may also undermine market efficiency, and property rights are essential to establish a legal framework for the functioning of the market economy and to encourage investment, but they do not necessarily guide self-interest to promote general economic self-interest.

How Is the Self-Interest of the Participants in an Economy