-Refer to Figure 9 -9. The diagram demonstrates that A) it is not possible for a monopolistic competitor to produce the productively efficient output level, Q_a,because of product differentiation. B) it is possible for a monopolistic competitor to produce the productively efficient output level, Q_a,, if it is willing to lower its price from P_bto P_a. C) in the long run the monopolistic competitor produces the minimum cost output level, Q_a,but in the short run its output of Q_bis not cost minimizing. D) in the short run the monopolistic competitor produces an output Q_bbut in the long run after it adjusts its capacity, it will produce run the allocatively efficient output, Q_a.

Question

Quizplus · Accepted Answer

Monopolistic competitors cannot achieve productive efficiency due to product differentiation, which prevents them from producing at the minimum average total cost.