Monopolistic competition results in
A)Allocative efficiency.
B)Production efficiency.
C)The wrong mix of output.
D)Marginal cost pricing.

Question

Quizplus · Accepted Answer

Monopolistic competition can lead to the wrong mix of output because firms have some pricing power due to product differentiation, but are still facing competition from other firms with similar products. This can result in businesses producing too much of one product and not enough of another, leading to inefficiencies in the market. Neither allocative efficiency nor production efficiency are guaranteed under monopolistic competition and marginal cost pricing may not occur.

Monopolistic Competition Results in