Implications of Market Orders in Liquidity

In recent years, numerous studies have been conducted to understand the implications of market microstructure on equity investments. One area of focus is the difference between limit orders and market orders within the context of trading efficiency.

A limit order is an instruction to buy or sell a security at a specified price or better, while a market order is executed immediately at the current market price. Understanding the impact of these two types of orders on market behavior and liquidity is crucial for investors.

Which of the following statements accurately reflects the implications of market orders in liquid markets?