Monopolistic competition is considered inefficient because
A)price exceeds marginal cost.
B)output is excessive.
C)long-run profits are positive.
D)barriers to entry limit the number of firms in the market.

Question

Quizplus · Accepted Answer

In monopolistic competition, firms have some power to set prices above marginal cost due to product differentiation, leading to inefficiency since the price charged to consumers is higher than the cost of producing one more unit.

Monopolistic Competition Is Considered Inefficient Because