The conclusion that free, unregulated markets will produce an efficient outcome breaks down if ?
Correct answer: D. all of the above
- A. households do not have perfect information
- B. firms are not price takers in input markets
- C. firms are not price takers in the output market
- D. all of the above
Explanation
The efficiency result for unregulated markets depends on competitive price-taking behaviour and adequate information. Imperfect information or market power in input or output markets can therefore cause the result to fail.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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