Question

Competitive markets result in allocative efficiency because they A-exhaust all possibilities for mutually beneficial trade. B-exhaust...

Competitive markets result in allocative efficiency because they

A-exhaust all possibilities for mutually beneficial trade.

B-exhaust all possible benefits for the consumer.

C-generate all possible benefits for the consumers.

D-distribute resources in the most equitable way.

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Answer #1

Option 1

A-exhaust all possibilities for mutually beneficial trade

A competitive market is in equilibrium at marginal benefit equal to marginal cost; it means the marginal benefit or consumers is equal to the marginal cost of producers. It is in equilibrium after all the bargaining as per supply and demand in the market, so the market does not have left any possibilities for mutually beneficial trade at below or above of the equilibrium when other things are constant.

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