Which statement concerning monopolistic competition is false?
A) Long-run equilibrium under monopolistic competition and pure competition both entail zero economic profits for firms.
B) Monopolistic competition is likely to result in a greater variety of product brands than pure competition.
C) The monopolistically competitive demand curve is more elastic than the demand curve facing a monopoly.
D) Long-run equilibrium in monopolistic competition does not entail any economic inefficiency because of easy entry and exit.

Question

Quizplus · Accepted Answer

Long-run equilibrium in monopolistic competition does entail economic inefficiency because of product differentiation and excess capacity. This means that firms are not producing at the lowest possible cost, leading to higher prices and lower output than would be seen in a perfectly competitive market.

Which Statement Concerning Monopolistic Competition Is False