A condition necessary for a market to achieve economic efficiency is that the market:

Question

Quizplus · Accepted Answer

Economic efficiency is achieved when the market equilibrium results in maximum total surplus (consumer surplus + producer surplus). For this to occur, the demand curve must reflect the willingness to pay (WTP) of all consumers who benefit from the good, including those who may not currently be participating in the market. This is known as the "social demand curve" and is equal to the sum of individual demand curves. Only when this is taken into account can the market allocate resources efficiently and prevent under or overproduction of the good.

A Condition Necessary for a Market to Achieve Economic Efficiency