Why could a monopolistically competitive market be considered inefficient

Question

Quizplus · Accepted Answer

In monopolistically competitive markets, firms have some control over the price they charge for their product, enabling them to set prices above marginal cost. This results in a markup of price over marginal cost, which leads to an inefficient allocation of resources. Consumers pay higher prices than they would in a perfectly competitive market, and producers do not produce as much output as they would if they faced a perfectly elastic demand curve. Therefore, monopolistically competitive markets are considered inefficient because they do not achieve the socially optimal level of output and price.

Why Could a Monopolistically Competitive Market Be Considered Inefficient