Does the monopolistic competitive firm exhibit resource-allocative efficiency?
A)No, because at its chosen quantity of output, price does not equal the lowest possible average total cost.
B)Yes, because at its chosen quantity of output, price equals marginal cost.
C)No, because at its chosen quantity of output, price is greater than marginal cost.
D)Yes, because at its chosen quantity of output, price is less than marginal cost.

Question

Quizplus · Accepted Answer

In monopolistic competition, firms have some market power, allowing them to set prices above marginal cost, leading to allocative inefficiency.

Does the Monopolistic Competitive Firm Exhibit Resource-Allocative Efficiency