Markets always allocate resources in ways that meet ideal economic efficiency.

True. Market encourages people to create value

True. The invisible hand guarantees good market results

False. The invisible hand never works

False. Markets can sometimes fail to reach efficiencies when there are externalities, public goods, monopoly, or serious information asymmetries

Question

Business

Davon Harmon

24 March, 23:11

Markets always allocate resources in ways that meet ideal economic efficiency.

True. Market encourages people to create value

True. The invisible hand guarantees good market results

False. The invisible hand never works

False. Markets can sometimes fail to reach efficiencies when there are externalities, public goods, monopoly, or serious information asymmetries

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Answers (1)

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Cha Cha · Answer 1

False. Markets can sometimes fail to reach efficiencies when there are externalities, public goods, monopoly, or serious information asymmetries

Explanation:

Invisible hand (effective allocation of resources in a laissez faire economy) sometimes works because when market function effectively and send correct price as signal of values (to society) to producers.

However, when goods can't be traded on markets (public goods) or its values are not correctly reflected on markets (externalities, information asymmetries) or competition is not ensured (monopoly), markets cannot ensure effective allocation of resources.