Asked by Prabha Karki on Jun 01, 2024
Verified
In long-run equilibrium, a monopolistically competitive producer achieves
A) neither productive efficiency nor allocative efficiency.
B) both productive efficiency and allocative efficiency.
C) productive efficiency but not allocative efficiency.
D) allocative efficiency but not productive efficiency.
Monopolistically Competitive
Describes a market structure where many firms sell products that are similar but not identical, allowing them room for differentiation and some degree of price control.
Productive Efficiency
A situation where a firm or economy can no longer produce additional amounts of a good without lowering the production level of another product, utilizing resources in the best way possible.
Allocative Efficiency
A situation in which resources are distributed in a way that aligns with the preferences and needs of society, maximizing social welfare and utility.
- Explain the process by which monopolistically competitive markets realize or fall short of realizing allocative and productive efficacy.
Verified Answer
ZK
Zybrea KnightJun 03, 2024
Final Answer :
A
Explanation :
In long-run equilibrium, a monopolistically competitive producer does not achieve productive efficiency because they do not produce at the minimum point of their average total cost curve. They also do not achieve allocative efficiency because the price they charge is higher than the marginal cost of production, indicating that not all resources are allocated to their most valued use.
Learning Objectives
- Explain the process by which monopolistically competitive markets realize or fall short of realizing allocative and productive efficacy.