Refer to Figure 26.2 for a monopolistically competitive firm.At the profit-maximizing output and price,this firm is producing at an output level that achieves
A)Productive efficiency.
B)Allocative efficiency.
C)Maximum economies of scale.
D)Neither productive nor allocative efficiency.

Question

Refer to Figure 26.2 for a monopolistically competitive firm.At the profit-maximizing output and price,this firm is producing at an output level that achieves
A)Productive efficiency. 
B)Allocative efficiency. 
C)Maximum economies of scale. 
D)Neither productive nor allocative efficiency.

Quizplus · Accepted Answer

At the profit-maximizing output and price, the firm is producing at a level where marginal revenue (MR) equals marginal cost (MC), which is not necessarily at the minimum point of the average total cost (ATC) curve, indicating that the firm is not achieving productive efficiency. The firm is also not producing at the point where price equals the marginal cost, indicating that the firm is not achieving allocative efficiency. Therefore, the answer is D, which is neither productive nor allocative efficiency.