In an imperfectly competitive market, the market fails because the free-market equilibrium price is _____ than the socially optimal price, and the resulting quantity is _____ than the socially optimal quantity.

Question

Quizplus · Accepted Answer

In an imperfectly competitive market, firms have some control over the prices they charge, often leading to higher prices than in a perfectly competitive market. This results in a quantity of goods produced and sold that is less than the socially optimal quantity, where social welfare (the sum of consumer and producer surplus) is maximized.

In an Imperfectly Competitive Market, the Market Fails Because the Free-Market