A free- market economy with perfect allocative efficiency does not exist in reality because
A) firms in many industries have some degree of market power and face negatively sloped demand curves,and produce a level of output where P > MC.
B) the decentralization of economic power in a free- market economy does not allow for allocative efficiency.
C) government intervention in the economy prevents the economic forces that would eventually bring the market to an allocatively efficient outcome.
D) the assumption of profit- maximization is not a realistic assumption about the behaviour of firms.
E) the assumption of utility maximization is not a realistic assumption about the behaviour of consumers.
Correct Answer:
Verified
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