The traditional view of monopolistic competition holds that this type of industrial structure is inefficient because

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The traditional view of monopolistic competition is based on the idea that firms in this market structure do not operate at the output level that minimizes average costs, leading to inefficiencies in production. This is because firms in monopolistic competition have some market power, which allows them to charge prices above marginal cost, but not enough market power to fully capture monopoly profits. As a result, they produce at a level that allows them to differentiate their products and maintain some market power, but not at the level that minimizes average costs. This leads to higher prices and lower output than would be optimal from a social welfare standpoint.

The Traditional View of Monopolistic Competition Holds That This Type