The most socially efficient market structure in the long run is:

Question

Quizplus · Accepted Answer

Perfect competition is the most socially efficient market structure because it leads to productive efficiency, allocative efficiency, and dynamic efficiency in the long run. In perfect competition, there are many buyers and sellers, homogeneous products, perfect information, and no barriers to entry or exit. This leads to a situation where firms compete solely on price and output, which leads to productive efficiency as resources are used in the most efficient way possible. Allocative efficiency is achieved because the price is equal to marginal cost, which leads to the optimal allocation of resources. Finally, dynamic efficiency is achieved because there is constant entry and exit, which leads to innovation and new technologies. Overall, perfect competition leads to the most efficient outcomes for society in the long run.

The Most Socially Efficient Market Structure in the Long Run