A market in which there are neither external benefits nor external costs is
A) efficient.
B) inefficient.
C) efficient and equitable.
D) impossible.

Question

Quizplus · Accepted Answer

When there are no externalities in a market, the price mechanism is able to allocate resources efficiently without any external intervention. All costs and benefits are reflected in the market price, and producers and consumers are able to make informed decisions about the goods and services they produce and consume. As a result, the market achieves allocative efficiency, which means that resources are allocated in such a way that the marginal benefit of production is equal to its marginal cost. Therefore, answer A) is correct.

A Market in Which There Are Neither External Benefits nor External