Monopolistic Competition Is Considered Inefficient Because

question 33

Multiple Choice

Monopolistic competition is considered inefficient because

• A)price exceeds marginal cost.
• B)output is excessive.
• C)long-run profits are positive.
• D)barriers to entry limit the number of firms in the market.

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Definitions:

Marginal Cost

The increase in total production cost that arises from producing one additional unit of a good or service.

Average Cost

The total cost of production divided by the number of goods produced, also known as unit cost.

Deadweight Loss

A reduction in economic effectiveness that happens when a good or service does not reach or cannot reach equilibrium.

Monopolist

A single seller in a market who has significant control over the price and supply of a product.