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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Which of the following is NOT considered a function of money?
A) It facilitates exchange. B) It acts as a means of payment. C) It can be held and exchanged for future goods and services. D) It allows banks to lend out funds.
Suppose in Belgium, the opportunity cost of producing a trombone is 8 clarinets. In Denmark, the opportunity cost of producing a trombone is 6 clarinets
a. What is the opportunity cost of producing a clarinet for Belgium? b. What is the opportunity cost of producing a clarinet for Denmark? c. Which country has a comparative advantage in the production of clarinets? d. Which country has a comparative advantage in the production of trombones?