Question

Monopolistic competition is an inefficient market structure because

a. price exceeds marginal cost.
b. it has a deadweight loss, just as monopoly does.
c. at the equilibrium, some consumers will value the good at more than the marginal cost of production.
d. all of the above are correct.

Answer 1

ALL OF THE ABOVE ARE CORRECT. A monopolistic competition scenario is an inefficient structure in the market place. It creates an unrealistic price expectation that exorbitantly exceeds marginal costs. Consumers bear the brunt of this burden by paying in excess for the services while these organisations hold the power to dictate to the consumer. Competition creates and boosts more demand for companies to provide better and more affordable products and services.