The market structure that is optimal in terms of welfare and that produces goods in the most efficient manner is

Question

Quizplus · Accepted Answer

In perfect competition, there is a large number of buyers and sellers, products are homogeneous, and there are no barriers to entry or exit. This leads to price being equal to marginal cost and allocative efficiency being achieved. Additionally, in perfect competition, firms produce at the lowest possible cost, leading to productive efficiency. These two factors make perfect competition the market structure that is optimal in terms of welfare and that produces goods in the most efficient manner. Monopoly and oligopoly, on the other hand, may result in lower levels of efficiency and higher prices due to market power and the lack of competition.

The Market Structure That Is Optimal in Terms of Welfare