Understanding Limit Orders in Market Microstructure

In the context of equity market microstructure, limit orders and market orders are two primary types of orders investors use to execute trades. Understanding these orders is crucial for navigating the trading environment effectively.

A limit order specifies a maximum price that an investor is willing to pay when buying, or a minimum price they are willing to accept when selling. In contrast, a market order is executed immediately at the current market price. Given this distinction, which of the following statements accurately describes the nature of limit orders and their impact on market dynamics?