Inefficiency in monopolistically competitive markets can be identified with:

Question

Quizplus · Accepted Answer

In monopolistically competitive markets, firms have some market power due to product differentiation. However, there are often many firms in the industry, which can lead to inefficiency. This is because firms may have excess capacity to differentiate their products and may not produce at the lowest possible cost. Therefore, monopolistically competitive markets do not have the 'ideal' number of firms in the industry, which can lead to inefficiency. The other choices are not applicable as monopolistically competitive markets are not perfectly competitive, do not have a first-best equilibrium where price is equal to marginal cost, and government programs that regulate price would interfere with the market structure.

Inefficiency in Monopolistically Competitive Markets Can Be Identified With