In a competitive market,
A)demand will always reflect all spillover costs.
B)demand will always reflect all spillover benefits.
C)supply will always reflect all spillover costs.
D)supply will always reflect all spillover benefits.
E)none of the above are true.

Question

Quizplus · Accepted Answer

In a competitive market, neither demand nor supply will always reflect all spillover costs or benefits. This is because in a competitive market, there are no externalities (spillover effects) as all costs and benefits are internalized by the parties involved in the transaction. However, if there are externalities present, then the market may not reach an efficient outcome and government intervention may be necessary to address these spillover effects.

In a Competitive Market