Question

32- The key implication of Adam Smith's invisible hand analogy:

A. each person pursuing their own self-interest unintentionally promote the social interest.

B. the economy guiding forces are price and profit signals.

C. all of the answers are correct.

D. the economy is a "bottom-up" distributive economy with no central authority.

33- Pareto optimality:

A. all of the answers are true.

B. is a general measure of economic efficiency.

C. a focus of economic analysis.

D. a condition in which you cannot make someone better off without making someone else worse off.

Answer 1

Question 32

Invisible hand analogy as propounded by Adam Smith indicates that each person works to attain his or her own self-interest.

However, such work by individual in unintentional manner leads to promotion of social interest as well.

Hence, the correct answer is the option (A).

Question 33

Pareto optimality refers to a scenario in which reallocation of resources would not make any individual in society better-off without making some other individual worse off.

Hence, the correct answer is the option (D).