Because monopolistically competitive firms charge a price that is greater than marginal cost:

A) monopolistic competition is efficient.
B) monopolistic competition is inefficient.
C) the marginal benefit to society of an additional unit of output is below its marginal cost.
D) monopolistic competition is inefficient and the marginal benefit to society of an additional unit of output is below its marginal cost.

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sharvaree bhosle · Accepted Answer

Final Answer : B, Explanation :  Monopolistic competition is inefficient because firms in this market structure do not produce at the point where marginal cost equals marginal revenue. Instead, they charge a price that is greater than marginal cost, leading to a deadweight loss (a loss of welfare to society). This means that resources are not being allocated efficiently, and there is a gap between the marginal benefit of an additional unit of output and its marginal cost. Therefore, the best choice is B - monopolistic competition is inefficient.

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