16. Many people believe that the free market is incapable of regulating itself. Some say we

need the government to regulate every aspect of business and the private sector.

A) True - only the government knows what is best for all of us and only they can act as an

honest, third party referee. Markets don't know how to self-regulate.

B) The free market can regulate itself to some degree. For example if people get ripped off

by a firm, then they will stop buying from them. This is an example of self-regulation.

C) The government controls the "invisible hand" that Adam Smith talked about. Adam

Smith thought that the market system was irrational and out-of-control most of the time.

D) People are too stupid to manage their own lives. Government must give us the overall

direction to our lives.