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.

Question

Quizplus · Accepted Answer

In a monopolistically competitive industry, firms have some market power but face competition from many other firms selling closely related but differentiated products. Due to this differentiation, firms may not be able to produce at the minimum efficient scale, leading to excess capacity. Marginal cost pricing does not typically occur in monopolistically competitive industries because firms have some market power and can charge prices above their marginal cost. Therefore, resources may not be allocated efficiently in this type of market structure.

Which of the Following Is True About a Monopolistically Competitive