Monopolistic competition results in allocative Inefficiency and productive efficiency. Inefficiency and productive inefficiency. Efficiency and productive...

Monopolistic competition results in allocative

Inefficiency and productive efficiency.

Inefficiency and productive inefficiency.

Efficiency and productive efficiency.

Efficiency and productive inefficiency.

Expert Solution

Answer Option 2- Inefficiency and productive inefficiency

Explanation: - monopolistic competition refers to that market structure where there are large number of buyer and large number of seller buying and selling the product, which are close substitute to each other. The firms operating under monopolistic competition are independent over their price and output decision. In other words monopolistic competition is a blend of some of the characteristics of monopoly market and perfect competition market.

To maximise profit the firm under monopolistic competition operate at that level of output where

1.Marginal cost (MC) = Marginal revenue (MR)

2. Marginal cost (MC) should intersects Marginal revenue (MR) from its below

Production Efficiency: refers to the maximum level of output produced by the firm by using an optimum combination of input. This can be achieved by the firm by producing the output where the price = minimum of ATC. In case of monopolistic competition market structure the firm produce the output (Profit maximising level of output) which is less than the output of minimum of ATC. So the firm operating under monopolistic competition cannot achieve productive efficiency.

Allocative Efficiency: A firm achieves allocative efficiency at that level of output, when the price set by the firm equal with marginal cost (MC) of production. In case of monopolistic competition market structure the firm set the price above the MC. Moreover the firm operates at profit maximising level of output which is less than allocative efficiency level of output (where Price = MC). So the firm operating under monopolistic competition cannot achieve Allocative efficiency.

To conclude Monopolistic competition results in allocative Inefficiency and productive inefficiency

Rahul Sunny answered 3 hours ago

Compare and contrast allocative inefficiency and productive inefficiency.

Which of the following statements is true about productive and allocative efficiency? Productive efficiency and allocative...

Which of the following statements is true about productive and allocative efficiency? Productive efficiency and allocative efficiency can only occur together; neither can occur without the other. Productive efficiency can only occur if there is also allocative efficiency. Society can achieve either productive efficiency or allocative efficiency, but not both simultaneously. Realizing allocative efficiency implies that productive efficiency has been realized. Select which of the statements below aretrue. Both pure and monopolistically competitive firms do not need to advertise their...

1) Define productive efficiency. Does productive efficiency imply allocative efficiency? Explain. Productive efficiency is a situation...

1) Define productive efficiency. Does productive efficiency imply allocative efficiency? Explain. Productive efficiency is a situation in which the economy could not produce any more of one good without sacrificing production of another good. In other words, productive efficiency occurs when a good or a service is produced at the lowest possible cost. Productive efficiency can be defined as producing goods and services for the lowest cost. Productive efficiency does not imply allocative efficiency because a firm or an industry...

Under monopolistic competition, the most likely outcome is for Group of answer choices productive efficiency. the...

Under monopolistic competition, the most likely outcome is for Group of answer choices productive efficiency. the absence of advertising expenditures. price to equal marginal revenue. price to exceed marginal cost. none of the other answers are correct. Flag this Question Question 142 pts Which statement is true? Group of answer choices A firm's explicit costs are the opportunity costs of using the resources that it already owns to make the firm's own product rather than selling those resources to outsiders...

Explain to your boss how technological advance increases productive efficiency and allocative efficiency.

Question A2 a) What is the relevance of productive and allocative efficiency to the growth process?...

Question A2 a) What is the relevance of productive and allocative efficiency to the growth process? Explain b) The achievement of full employment is a sufficient condition for the achievement of economic growth. Evaluate.

Monopolistic competition is said to be inefficient. Give reasons of its market inefficiency.

In monopolistically competitive markets, neither allocative nor productive efficiency is realized" explain.

1. Explain why the condition of production and allocative efficiency tend to not emerge in monopolistic...

1. Explain why the condition of production and allocative efficiency tend to not emerge in monopolistic markets. Explain why a firm should shut down when the given market price is below its average variable costs. 2. Explain why HHI measures are superior to the four-firm concentration ratio for assessing the level of potential market power in an industry. Explain why HHI measures are not effective at identifying potential collusion or price fixing in the industry.

c. Explain the TWO efficiency implications of Monopolistic Competition.

Question