Multiple Choice QuestionMonopolistically competitive firms are not productively efficient because output is less than society's optimal level because a producer's Blank______.Multiple choice question.average variable cost per unit is not at its optimal possible costaverage fixed cost per unit is not at its lowest possible costmarginal revenue per unit is not at its optimal possible priceaverage total cost per unit is not at its lowest possible cost
Question
Multiple Choice QuestionMonopolistically competitive firms are not productively efficient because output is less than society's optimal level because a producer's Blank______.Multiple choice question.average variable cost per unit is not at its optimal possible costaverage fixed cost per unit is not at its lowest possible costmarginal revenue per unit is not at its optimal possible priceaverage total cost per unit is not at its lowest possible cost
Solution
The correct answer is: "average total cost per unit is not at its lowest possible cost"
Here's why:
Monopolistically competitive firms are not productively efficient because they do not produce at the lowest point on their average total cost curve. In a monopolistically competitive market, firms have some degree of market power, which means they can raise their prices above marginal cost. This results in an output level that is less than what would be considered optimal for society, hence they are not productively efficient.
Productive efficiency occurs when a firm is producing at the lowest point on its average total cost curve, meaning it is producing its output at the lowest possible cost. Since monopolistically competitive firms do not produce at this point, they are not productively efficient.
Therefore, the correct answer is that the average total cost per unit is not at its lowest possible cost.
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