The traditional view of monopolistic competition holds that this type of industrial structure is inefficient because

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In monopolistic competition, firms do not operate at the output that minimizes average costs, resulting in inefficient production. This is due to the fact that firms in monopolistic competition have some market power and can charge a markup over marginal cost, leading to a lower level of output than what would be efficient in a perfectly competitive market.

The Traditional View of Monopolistic Competition Holds That This Type