Asked by Eliza Howard on May 30, 2024
Verified
(Figure: Model of a Competitive Market) Use Figure: Model of a Competitive Market.Given the figure,if there are no external benefits or costs,the output at Q will be:
A) larger than is socially desirable.
B) smaller than is socially desirable.
C) efficient.
D) inefficient.
Competitive Market
A market structure characterized by a large number of buyers and sellers, free entry and exit, and a product that is homogenous across suppliers, leading to price competition and efficiency.
External Benefits
Benefits from a transaction or activity that accrue to others not directly involved in the transaction or activity.
External Costs
Costs generated by production or consumption activities that are not borne by the producer or consumer but by a third party or society at large.
- Understand the concept of market efficiency and how externalities affect market outcomes.
Verified Answer
DV
Dulmi VimangaMay 30, 2024
Final Answer :
C
Explanation :
The point where the supply and demand curves intersect is known as the equilibrium point of the market. At this point, the price is equal to the marginal cost of producing the last unit, and the market is efficient. Therefore, the output at Q is efficient, and there are no external benefits or costs.
Learning Objectives
- Understand the concept of market efficiency and how externalities affect market outcomes.