Refer to the passage: The classical economists believed that markets, left to themselves, would naturally produce socially optimal outcomes — a doctrine often summarized through the metaphor of the invisible hand. According to this view, individuals pursuing their own self-interest unwittingly serve the broader public good through the price mechanism, which transmits information about scarcity, preferences, and productive opportunities across millions of transactions. Critics, however, have long pointed out that such an idealized account ignores externalities, asymmetric information, and the persistent reality of market power. When a factory's emissions impose costs on neighboring residents without compensation, when consumers cannot reliably evaluate the quality of credence goods like medical procedures, or when a single firm dominates a regional labor market, the assumption of competitive equilibrium breaks down. Modern economics has not so much repudiated the classical insight as qualified it: markets remain extraordinary engines of coordination, but their failures justify a range of public interventions, from pollution taxes to consumer-protection regulations to antitrust enforcement. The continuing debate is less about whether to intervene than about how, when, and at what cost. Which statement, if true, would most weaken the classical view as described in the passage?
ASome industries have many competing firms.
BSome governments enact poor policies.
CMost real-world markets exhibit significant asymmetries of information or concentrated market power.
DMost markets reach approximate equilibrium quickly.
Answer & Solution
Correct answer: C. Most real-world markets exhibit significant asymmetries of information or concentrated market power.
The classical view assumes competitive equilibrium. (B) directly attacks this assumption by saying real-world markets violate competitive conditions. (A) and (C) support the classical view. (D) is about government, not markets.
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