Which of the following best summarizes the essence of the Invisible Hand Theorem?
a. Competitive markets guarantee that any shortages or surpluses existing in an economy will be quickly eliminated.
b. Of all the possible economic systems, competitive markets are the most philosophically compatible with democracy and freedom.
c. Within competitive markets, people who selfishly pursue their own interests end up achieving a socially desirable outcome.
d. The social gain created by competitive markets is second only to what a hypothetical benevolent dictator could achieve.
c. Within competitive markets, people who selfishly pursue their own interests end up achieving a socially desirable outcome.
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If the price level is 100 in one year and rises to 102 the next year, then the inflation rate is
A) 0.02 percent. B) 100 percent. C) 102 percent. D) 2.0 percent. E) unable to be determined without knowing potential GDP.
Kumiko is not at her consumer equilibrium because she sees too many movies and buys too few books. As she moves toward her consumer equilibrium, her marginal utility from movies will ________ and her marginal utility from books will ________
A) decrease; decrease B) increase; decrease C) decrease; increase D) increase; increase
The interest parity condition indicates that the interest differential is equal to the
A) risk premium. B) forward premium. C) futures premium. D) arbitrage premium.
Natural monopolies have been slowly eroded by
A. market imbalances. B. rising costs. C. technological change. D. perfect competition.