A monopolistic competitive firm is inefficient because the firm:
A) is not maximizing its profit.
B) is producing at an output where average total cost is not minimum.
C) earns positive economic profit in the long run.
D) none of these.

Question

Quizplus · Accepted Answer

Monopolistically competitive firms produce at a level where average total cost is not minimum, which means they are producing at a level where they could produce at a lower cost if they produced more. This inefficiency leads to higher costs and lower productivity, ultimately lowering the firm's profits. Therefore, choice B is the best answer.

A Monopolistic Competitive Firm Is Inefficient Because the Firm