Question

Which of the following is NOT an example of the invisible hand in action? A. producers offer people what they want B. competition results in decreased prices C. producers work together to increase prices D. consumers have desirable products

Answer 1

Answer:

C. producers work together to increase prices

Explanation:

The concept of the invisible hand in economics was introduced by the classical economist Adam Smith, who is considered the father of economic liberalism. According to Smith, men have a natural selfish tendency and will seek to satisfy their own needs through trade in goods and services. Thus a positive effect of each man's selfish and individual attitudes will be felt in the economy. When everyone seeks their benefits, the wheel of economics spins. This is what Smith calls the invisible hand.

Consumers will demand goods and services according to their needs. Business owners, seeking to increase their wealth, will provide consumers with the most desired products. Consumers are rational and tend to buy goods from those they provide at a lower price.

Thus competition is a central element by which Smith justifies the invisible hand. The act of union of producers is considered a cartel, something contrary to the mechanisms of competition and therefore does not fit the metaphor of the invisible hand.