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56. To say that government intervenes in the economy to promote efficiency is to say that government is attempting to a. create a more fair distribution of income. b. change the way in which the economic pie is divided. c. enlarge the economic pie. d. All of the above are correct. ANS: C 57. Which of the following could reduce economic efficiency? a. laws that encourage lawsuits. b. policies that redistribute income c. policies that impose significant restrictions on international trade d. All of the above are correct ANS: D 58. The term used to describe a situation in which markets do not allocate resources efficiently is a. economic meltdown. b. market failure. c. equilibrium. d. the effect of the invisible hand. ANS: B 59. A rationale for government involvement in a market economy is as follows: a. Markets sometimes fail to produce a fair distribution of economic well-being. b. Markets sometimes fail to produce an efficient allocation of resources. c. Property rights have to be enforced. d. All of the above are correct. ANS: D 60. The term market failure refers to a. a situation in which the market on its own fails to allocate resources efficiently. b. an unsuccessful advertising campaign which reduces demand for a product. c. a situation in which competition among firms becomes ruthless. d. a firm which is forced out of business because of losses. ANS: A
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