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

Question

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The traditional view of monopolistic competition holds that firms in this market structure do not operate at the output level that minimizes average costs, which leads to inefficiency. This is because firms in monopolistic competition produce differentiated products that are not perfect substitutes, meaning they have some market power to set prices above marginal costs. As a result, they produce a lower level of output than would be produced under perfect competition, leading to higher average costs.

The Traditional View of Monopolistic Competition Holds That This Type