Question

The invisible-hand concept suggests that.

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

Answer 1

When firms maximize their profits, society's output will also be maximized is the concept of the 'invisible hand.' This was first introduced by Adam Smith in the mid 1700's.