Question

multiple choice question
what must be eliminated or avoided if the \invisible hand\ is to produce socially optimal outcomes in purely competitive markets?
normal profits
economic surplus
allocative efficiency
externalities

Explanation:

Externalities are costs or benefits that affect third - parties not involved in a market transaction. In the presence of externalities, the market equilibrium determined by the "invisible hand" does not lead to socially optimal outcomes. Normal profits are a part of a healthy competitive market, economic surplus is the sum of consumer and producer surplus which is maximized under certain conditions in a competitive market, and allocative efficiency is a goal of the "invisible hand" in a well - functioning competitive market.

Answer:

D. Externalities