A monopolistically competitive firm may be more inefficient than a perfectly competitive one because

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In the long run, a monopolistically competitive firm may produce a smaller output than the minimum efficient scale (MES), leading to higher unit costs and less efficiency than a perfectly competitive firm that produces at the MES. Additionally, the firm may not have the incentive to minimize costs or innovate as much as a perfectly competitive firm, as it has some degree of market power and can charge a price above marginal cost. A, C, D, and E are not necessarily true for all monopolistically competitive firms.

A Monopolistically Competitive Firm May Be More Inefficient Than a Perfectly