In a perfectly competitive market ____________ determines how value created is divided between consumers and producers.

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In a perfectly competitive market  ____________ determines how value created is divided between consumers and producers.

BlackTom AI · Accepted Answer

The question asks which concept in a perfectly competitive market determines how value created is divided between consumers and producers.
First, consider the option about monopoly power. Monopoly power suggests a single seller can influence prices, which disrupts competitive pricing and typically leads to a different distribution of surplus than in perfect competition; thus it does not describe the standard division mechanism in a perfectly competitive market.
Next, the idea of information assymetry (asymmetry) implies that one party has more or better information than another, which can lead to adverse selection or moral hazard. While information gaps affect market outcomes, they are not the defining mechanism for how value is split in a perfectly competitive framework where information is assumed to be perfect and markets clear at equilibrium.
Then, bargaining power refers to the ability of buyers or sellers to influence terms of trade. In a perfectly competitive market, no single participant possess outsized bargaining power because many buyers and sellers are small relative to the market, so terms are determined by market forces rather than negotiated power, making this an unlikely sole determinant of value division in that model.
Finally, the phrase about the invisible hand captures the classical idea that, in a perfectly competitive market, prices adjust through supply and demand until resources are allocated efficiently, and surplus is distributed according to willingness to pay and marginal costs. This price mechanism acts as the coordinating force that indirectly divides value between consumers and producers in equilibrium.
Overall, the remaining options fail to describe the standard distribution mechanism in perfect competition, either by introducing distortions (monopoly power), assuming imperfect information (information asymmetry), or emphasizing bilateral negotiations (bargaining power) that are muted in a highly competitive setting. The remaining conceptual framework aligns with how value allocation emerges from the price system under perfect competition.

In a perfectly competitive market ____________ determines how value created is divided between consumers and producers.

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