Which of the following is true about a monopolistically competitive industry?
A)Marginal cost pricing occurs.
B)There is excess capacity.
C)Resources are allocated efficiently.
D)It produces at the minimum of ATC.

Question

Quizplus · Accepted Answer

In a monopolistically competitive industry, firms often have excess capacity, meaning they are not operating at their most efficient level of production. This is because firms in this industry have some degree of market power and are able to charge slightly higher prices than in perfect competition, but not enough to fully monopolize the market. As a result, they may produce less than the minimum efficient scale, leading to excess capacity. None of the other options are necessarily true in a monopolistically competitive industry.

Which of the Following Is True About a Monopolistically Competitive