Some economists argue that monopolistically competitive markets are inefficient because:
A) the firms earn economic profits in the long run.
B) the firms' marginal costs and marginal revenues are not always equal.
C) firms do not produce the output rate that would minimize their average total cost.
D) barriers to entry are high.

Question

Quizplus · Accepted Answer

In monopolistic competition, firms do not produce at the minimum point of their average total cost curve, leading to excess capacity and inefficiency.

Some Economists Argue That Monopolistically Competitive Markets Are Inefficient Because