Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
A perfectly competitive market with no externalities
B
A monopolistic market that sets prices below marginal cost
C
A market experiencing positive externalities that are unaddressed
D
Government intervention that corrects for information asymmetry
E
A market where consumer preferences are perfectly aligned with producer offerings
Understanding the Answer
Let's break down why this is correct
Answer
An optimal market outcome occurs when resources are allocated in the most efficient way, meaning that everyone benefits as much as possible from what is available. For example, if a farmer grows apples and sells them at a fair price, both the farmer and the customers benefit; the farmer earns money while customers enjoy fresh apples. This can happen when there is healthy competition among sellers, allowing prices to stay fair and quality to be high. On the other hand, a sub-optimal outcome might occur if one seller has too much control over the market, leading to higher prices and fewer choices for consumers. Therefore, scenarios that promote competition, fair pricing, and consumer choice are likely to lead to an optimal market outcome.
Detailed Explanation
None of the options provided lead to an optimal market outcome. Other options are incorrect because A perfectly competitive market is good, but if there are no externalities, it doesn't guarantee the best outcome; A monopoly setting prices below costs can hurt profits and lead to shortages.
Key Concepts
Optimal outcomes
Market efficiency
Externalities
Topic
Optimal and Sub-optimal Outcomes
Difficulty
hard level question
Cognitive Level
understand
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