If a market is missing:
A) deadweight loss is zero.
B) total surplus is maximized.
C) the market is inefficient.
D) trades are not mutually beneficial.

Question

Quizplus · Accepted Answer

If a market is missing, it means that there is no interaction between buyers and sellers, and hence, the market is not reaching its potential. This inefficiency results in a loss to both consumers and producers, causing deadweight loss, making option A incorrect. Since there are no trades occurring, it cannot lead to the maximization of total surplus, making option B incorrect. Moreover, as there is no interaction between buyers and sellers, it rules out the possibility of trades being mutually beneficial, making option D incorrect. Therefore, option C, i.e., the market is inefficient, is the correct answer.

If a Market Is Missing