Perfectly competitive markets will set a price and quantity at which the deadweight loss to society is
A) zero
B) small
C) very large

Question

Quizplus · Accepted Answer

In perfectly competitive markets, the price and quantity are determined by the intersection of the demand and supply curves, which represents the point where resources are allocated efficiently. At this equilibrium, the value of the marginal benefit to consumers is equal to the marginal cost to producers. Therefore, there is no underproduction or overproduction in the market, and the deadweight loss to society is zero, making choice A the best answer.

Perfectly Competitive Markets Will Set a Price and Quantity at Which