Using the basic supply/demand framework, economic analysis of market structure leads to the conclusion that:
A) perfect competition promotes efficient outcomes, whereas the other market structures are associated with some deadweight loss.
B) monopoly promotes efficient outcomes, whereas the other market structures are associated with some deadweight loss.
C) oligopoly promotes efficient outcomes, whereas the other market structures are associated with some deadweight loss.
D) monopolistic competition promotes efficient outcomes, whereas the other market structures are associated with some deadweight loss.

Question

Quizplus · Accepted Answer

Perfect competition leads to efficient outcomes because firms produce at a level where price equals marginal cost, maximizing total surplus and minimizing deadweight loss. Other market structures, like monopoly, oligopoly, and monopolistic competition, typically result in some level of inefficiency and deadweight loss due to pricing above marginal cost.

Using the Basic Supply/demand Framework, Economic Analysis of Market Structure