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

Marketing Dec 24, 2020

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.

Expert Solution

The answer is the term used to describe a situation in which markets do not allocate resources efficiently is called B)marketfailureB)marketfailure.

The cigarette market did not include damage to people's health done by smoking. These health effects are a negative externality not addressed in the market price of cigarettes. When not all resources involved in producing and using a product are in the market price, there is market failure.

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