Question

Are monopolistically competitive firms efficient in​ long-run equilibrium? Monopolistically competitive firms A. are productively efficient because they produce at minimum average total cost and they are not allocatively efficient because they produce where price is equal to marginal revenue. B. are not productively efficient because they do not produce at minimum marginal cost and they are allocatively efficient because they produce where price is equal to marginal revenue. C. are not productively efficient because they do not produce at minimum marginal cost and they are allocatively efficient because they produce where marginal cost equals marginal revenue. D. are not productively efficient because they do not produce at minimum average total cost and they are not allocatively efficient because they produce where price is greater than marginal cost. E. are not productively efficient because they do not produce at minimum average total cost and they are not allocatively efficient because they produce where price is less than marginal cost.

Answer 1

Answer:

E)are not productively efficient because they do not produce at minimum average total cost and they are not allocatively efficient because they produce where price is greater than marginal cost.

Explanation:

Monopolistic competition can be regarded as imperfect competition whereby many producers that are competing against each other exist in the market, though they are selling products which can be differentiated from one another. Monopolistically competitive firms do

maximize their profit if their production is at a level where marginal costs as well as its marginal revenues equals. Hence, monopolistically competitive firms are not productively efficient because they do not produce at minimum average total cost and they are not allocatively efficient because they produce where price is greater than marginal cost.