Productive efficiency does not hold for a profit-maximising, monopolistically competitive firm in the long-run equilibrium because the firm operates along the diseconomies-of-scale region of its average total cost curve.

Question

Quizplus · Accepted Answer

In the long-run equilibrium, a monopolistically competitive firm operates where its demand curve is tangent to its average total cost curve, not necessarily in the diseconomies-of-scale region. Productive efficiency is not achieved because the firm produces at a point where average total cost is not minimized.

Productive Efficiency Does Not Hold for a Profit-Maximising, Monopolistically Competitive