Final answer:
Yes, a perfectly competitive market demonstrates allocative efficiency because firms produce at a point where price equals marginal cost, maximizing societal welfare by ensuring that resources are optimally distributed.
Step-by-step explanation:
A perfectly competitive market will indeed display allocative efficiency. This is because, in such a market, firms produce where the price equals the marginal cost, denoted as P = MC. The significance of producing at this point is that the social benefits of additional production, which are represented by the price people are willing to pay (marginal benefit), are exactly matched by the marginal costs to society for that production. As a result, the quantity supplied in the market will be the quantity that maximizes societal welfare by ensuring that resources are distributed such that the last unit's cost equals its value to consumers.
By contrast, a monopolistically competitive market does not achieve allocative efficiency because firms set prices higher than marginal costs (P > MC). This results in lower production and higher prices compared to a perfectly competitive market, which means that there are unrealized net benefits to society as some consumers' willingness to pay exceeds the cost of production.