In the absence of externalities, which market structure produces the socially optimal quantity?

Question

BlackTom AI · Accepted Answer

When considering the social efficiency of markets without externalities, we compare how each structure allocates resources to where marginal social benefit equals marginal social cost.
Option 1: Perfect competition. In a perfectly competitive market with no externalities, many buyers and sellers, price equals marginal cost, and output is driven to the point where P = MC. This alignment yields the socially optimal quantity because it maximizes total surplus.
Option 2: Monopolistic competition. Although there are many firms, product differentiation gives each firm some market power. They set prices above marginal cost, leading to a quantity produced that is below the social optimum and a deadweight loss.
Option 3: An oligopoly. With a few large firms, strategic interactions can enable price setting above marginal cost or restrictive output. This usually results in underproduction or pricing that reduces total welfare compared to perfect competition, moving away from the social optimum.
Option 4: A monopoly. A single seller faces the market and can restrict output to raise price. The result is a quantity well below the socially optimal level, generating a clear deadweight loss and inefficiency.
Option 5: A monopsony. A single buyer can depress input prices and reduce the quantity purchased, which also tends to underproduce relative to the social optimum and lowers total welfare when externalities are absent.
In summary, among these structures, the perfectly competitive market best achieves the socially optimal quantity under the stated conditions because it minimizes pricing power and aligns price with marginal cost.

AP Economics-Hillebrand Quiz Micro 6.1-6.3- Requires Respondus LockDown Browser

In the absence of externalities, which market structure produces the socially optimal quantity?

查看解析

登录即可查看完整答案

类似问题

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

Which of the following will be true if the firm is in a perfectly competitive market and the price is P1 ?

Zucchini is produced in a perfectly competitive market with a downward-sloping demand curve and an upward- sloping supply curve. Dawson Farm is a typical perfectly competitive farm that produces and sells zucchini at the equilibrium price of $1.75 per pound. Which of the following is true?

In the absence of barriers to entry, a typical firm is currently in long-run equilibrium. Assume there is an increase in the market demand for the good that the firm is producing. Which of the following will happen in the long run?

In a perfectly competitive market, the process of entry and exit will end when firms in the market:

The following figure represents the cost curves and the market price for a perfectly competitive firm. Which of the following statements is true about the long run equilibrium in this market?

The following figure represents the cost curves and the market price for a perfectly competitive firm. Which of the following statements is true about the long run equilibrium in this market?

Question18 Which of the following are not needed for market efficiency? Goods are excludable and rival Consumers and producers are price-takers Homogeneous goods Easy access to goods ResetMaximum marks: 1 Flag question undefined

更多留学生实用工具

考试浏览器助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单