Monopolistic competition results in allocative
A)Inefficiency and productive efficiency.
B)Inefficiency and productive inefficiency.
C)Efficiency and productive efficiency.
D)Efficiency and productive inefficiency.

Question

Quizplus · Accepted Answer

Monopolistic competition typically results in allocative inefficiency because firms do not produce at the lowest point on the average cost curve, leading to prices that do not reflect the marginal cost of production. It also results in productive inefficiency because firms have excess capacity.

Monopolistic Competition Results in Allocative