The "invisible hand" concept suggests that:
A)changes in product demands are only randomly reflected in changes in the demands for resources.
B)profit maximization is inconsistent with an efficient allocation of resources.
C)government action is necessary to correct for market failures.
D)when firms maximize their profits, society's domestic output will also be maximized.

Question

Quizplus · Accepted Answer

The "invisible hand" concept, coined by Adam Smith, suggests that when firms maximize their profits in a competitive market, resources will be allocated efficiently and society's domestic output will also be maximized. This concept is based on the idea that individual self-interest can lead to socially desirable outcomes without the need for government intervention. Therefore, option D (when firms maximize their profits, society's domestic output will also be maximized) is the best choice.

The "Invisible Hand" Concept Suggests That