Monopolistic competitive firms are productively inefficient because production occurs where

Question

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Monopolistic competitive firms are characterized by producing at a quantity where their average total cost is not at its lowest point. This is because they have some degree of market power, which allows them to charge a price above their marginal cost, but not high enough to deter entry from other firms. As a result, they may not produce at the lowest possible cost, leading to productive inefficiency. Choices A and B are incorrect because they do not relate to production efficiency. Choice C may be true for any firm that is not producing at their lowest point of the marginal cost curve, but it is not specific to monopolistic competition.

Monopolistic Competitive Firms Are Productively Inefficient Because Production Occurs Where