Question

Which of these markets is more likely to result in an efficient allocation of goods?

a. A market with many buyers and a few sellers, who sell slightly different goods.

b. A market with many buyers and many sellers, who all sell identical goods.

c. A market with a few buyers and many sellers, who all sell identical goods.

d. A market with many buyers and many sellers, who sell slightly different goods.

Answer 1

Ans. b) A market with many buyers and many sellers, who all sell identical goods.

A market with many buyers and many sellers, who all sell identical goods, is represented the perfectly competitive market.

In this market, the equilibrium price decided by the intersection of the demand-supply curve which represents the efficient allocation of the goods ( because everyone has full information about the market ) and At this equilibrium price, buyers and sellers maximize their surplus. ( consumer and producer surplus ).