Which of the following statements about self-interest in a market system is false?

• A. Consumers acting in their own self-interest seek to maximize utility.
• B. Self-interest in a market system always leads to outcomes that are socially optimal.
• C. Self-interest motivates individuals to make choices that benefit themselves.
• D. Firms acting in their own self-interest seek to maximize profits.

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the concept of self-interest in a market system. Self-interest means individuals or firms make decisions to maximize their own benefits, such as utility for consumers or profits for firms.
2. Step 2: Analyze each statement in the problem to see if it aligns with the economic theory of self-interest:
3. Step 3: Recognize that consumers acting in their own self-interest seek to maximize utility, which is a fundamental assumption in microeconomics.
4. Step 4: Note that firms acting in their own self-interest seek to maximize profits, which is also a standard assumption in microeconomic theory.
5. Step 5: Identify that the statement claiming self-interest always leads to socially optimal outcomes is false because individual self-interest can sometimes lead to market failures or externalities, meaning the outcome is not always socially optimal.