CUSTOM ID: 032.01 - SAE - MANK08
33. Invisible hand is a term used by the economist ______ to describe how the decisions of households and firms lead to
desirable market outcomes.
ANSWER: Adam Smith
DIFFICULTY: Easy
LEARNING OBJECTIVES: ECON.MANK.012 - Apply basic, economic principles of individual decision making
that determine how an economy generally works.
KEYWORDS: BLOOM'S: Application
CUSTOM ID: 033.01 - SAE - MANK08
34. Economists use the term ______ to refer to a situation in which the market on its own fails to produce an efficient
allocation of resources.
ANSWER: market failure
DIFFICULTY: Easy
LEARNING OBJECTIVES: ECON.MANK.014 - Assess a market's efficiency.
KEYWORDS: BLOOM'S: Knowledge
CUSTOM ID: 034.01 - SAE - MANK08
35. What are the two possible causes of market failure?
ANSWER: Externality and market power
DIFFICULTY: Moderate
LEARNING OBJECTIVES: ECON.MANK.014 - Assess a market's efficiency.
KEYWORDS: BLOOM'S: Application
CUSTOM ID: 035.01 - SAE - MANK08
36. Explain the concept of externality and give an example.
ANSWER: The impact of one person’s actions on the well-being of a bystander; pollution
DIFFICULTY: Moderate
LEARNING OBJECTIVES: ECON.MANK.097 - Examine the effects of an externality on a market.
KEYWORDS: BLOOM'S: Application
CUSTOM ID: 036.01 - SAE - MANK08
37. What are the two reasons for the government to intervene in a market?
ANSWER: To promote efficiency and equality
DIFFICULTY: Moderate
Copyright Cengage Learning. Powered by Cognero. Page 9
LEARNING OBJECTIVES: ECON.MANK.012 - Apply basic, economic principles of individual decision making
that determine how an economy generally works.
KEYWORDS: BLOOM'S: Application
CUSTOM ID: 037.01 - SAE - MANK08
38. What does the “invisible hand” refers to?
ANSWER: How the decisions of self-interested households and firms lead to desirable market
outcomes.
DIFFICULTY: Easy
LEARNING OBJECTIVES: ECON.MANK.012 - Apply basic, economic principles of individual decision making
that determine how an economy generally works.
TOPICS: Economic thinking
Invisible hand principle
KEYWORDS: BLOOM'S: Knowledge
CUSTOM ID: 038.01 - SAE - MANK08
39. Invisible hand is a term used by the economist ______ in his 1776 book An Inquiry into the Nature and Causes of the
Wealth of Nations.
ANSWER: Adam Smith
DIFFICULTY: Easy
LEARNING OBJECTIVES: ECON.MANK.012 - Apply basic, economic principles of individual decision making
that determine how an economy generally works.
TOPICS: Economic thinking
Invisible hand principle
KEYWORDS: BLOOM'S: Knowledge
CUSTOM ID: 039.01 - SAE - MANK08
40. What do prices reflect in a market economy?
ANSWER: The value of a good to society and the cost to society of making the good
DIFFICULTY: Easy
LEARNING OBJECTIVES: ECON.MANK.012 - Apply basic, economic principles of individual decision making
that determine how an economy generally works.
TOPICS: Economic thinking
KEYWORDS: BLOOM'S: Knowledge
CUSTOM ID: 040.01 - SAE - MANK08
41. Explain the concept of market failure.
ANSWER: Market failure is a situation in which the market on its own fails to produce an efficient
allocation of resources.
DIFFICULTY: Easy
LEARNING OBJECTIVES: ECON.MANK.014 - Assess a market's efficiency.
KEYWORDS: BLOOM'S: Knowledge
CUSTOM ID: 041.01 - SAE - MANK08
42. Economists use the term ______ to refer to the ability of a single person (or a small group) to have a substantial
influence on market prices.
ANSWER: market power
DIFFICULTY: Easy
Copyright Cengage Learning. Powered by Cognero. Page 10
LEARNING OBJECTIVES: ECON.MANK.012 - Apply basic, economic principles of individual decision making
that determine how an economy generally works.
KEYWORDS: BLOOM'S: Knowledge
CUSTOM ID: 042.01 - SAE - MANK08
43. Give an example of government intervention that is intended to reduce an externality.
ANSWER: Laws that restrict the smoking of cigarettes in public places
DIFFICULTY: Moderate
LEARNING OBJECTIVES: ECON.MANK.097 - Examine the effects of an externality on a market.
KEYWORDS: BLOOM'S: Application
CUSTOM ID: 043.01 - SAE - MANK08
44. Give an example of government intervention that is intended to improve equality.
ANSWER: The income tax; the welfare system
DIFFICULTY: Moderate
LEARNING OBJECTIVES: ECON.MANK.012 - Apply basic, economic principles of individual decision making
that determine how an economy generally works.
KEYWORDS: BLOOM'S: Application
CUSTOM ID: 044.01 - SAE - MANK08
45. Economists use the term ______ to refer to an increase in the overall level of prices in the economy.