Because monopolistically competitive firms charge a price that is greater than marginal cost:

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Monopolistic competition is inefficient because firms in this market structure do not produce at the point where marginal cost equals marginal revenue. Instead, they charge a price that is greater than marginal cost, leading to a deadweight loss (a loss of welfare to society). This means that resources are not being allocated efficiently, and there is a gap between the marginal benefit of an additional unit of output and its marginal cost. Therefore, the best choice is B - monopolistic competition is inefficient.

Because Monopolistically Competitive Firms Charge a Price That Is Greater