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Unformatted text preview: supply and demand, and we saw that the equilibrium of supply and demand is typically an efficient allocation of resources. To use Adam Smiths famous metaphor, the invisible hand of the marketplace leads self-interested buyers and sellers in a market to maximize the total benefit that society derives from that mar-ket. This insight is the basis for one of the Ten Principles of Economics in Chapter 1: Markets are usually a good way to organize economic activity. Should we con-clude, therefore, that the invisible hand prevents firms in the paper market from emitting too much dioxin? E X T E R N A L I T I E S 205...
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- Spring '10