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

Question

Quizplus · Accepted Answer

In monopolistic competition, firms have some degree of market power and can charge higher prices than in perfect competition. This leads to an inefficient allocation of resources, as the price consumers pay does not reflect the true cost of production. Additionally, there may be a lack of productive efficiency as firms may not be operating at the lowest possible cost. Therefore, monopolistic competition results in both allocative and productive inefficiency.

Monopolistic Competition Results in Allocative