Question

In markets, the invisible hand allocates resources efficiently

a. when there are negative externalities, but not when there are positive externalities.
b. when the buyers and sellers are the only interested parties.
c. when there are positive externalities, but not when there are negative externalities.
d. in all cases.

Answer 1

In markets, the invisible hand allocates resources efficiently when the buyers and sellers are the only interested parties. The invisible hand is a metaphor found in a free market economy. The invisible hand refers to how people in a free market operate while trying to operate in a mutual way to promote the general benefit of society overall.