Final answer:
If past prices can't be used to earn abnormal returns, the market is considered to have at least weak-form efficiency. In a perfectly competitive market, both productive and allocative efficiencies would be expected in the long run, but this ideal can be influenced by factors like income distribution.
Step-by-step explanation:
If past prices may not be used to earn abnormal returns, then the market is operating with at least weak-form efficiency. This level of market efficiency suggests that all past prices of securities are fully reflected in current market prices, and thus, cannot be used to predict future prices and earn abnormal profits. Weak-form efficiency is one of the three forms of the Efficient Market Hypothesis (EMH), the other two being semi-strong and strong-form efficiencies.
In the context of a perfectly competitive market, economic theory suggests that in the long run, such a market will feature both productive and allocative efficiency. However, this ideal does not always align with real-world scenarios, where income distribution can significantly affect consumers' abilities to pay, impacting the market's allocative efficiency. Despite this, if a market is unable to produce goods at minimum average total costs or set prices equal to marginal costs, it deviates from being 'perfect' since it fails to meet the criteria for allocative or productive efficiency.