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Subject - Economics:

Microeconomics

MCQ - 91-4101

Question:

Monopolistic competition is said to be productively inefficient because

  1. the long-run price is above minimum average total cost.
  2. long-run profits are positive.
  3. firms engage in collusive behavior.
  4. long-run profits are positive.
  5. there exist diseconomies of scale.

Correct Answer: A

Explanation:

Profits are normal and P = ATC, but unlike perfect competition, P > minimum ATC, so the industry is not productively efficient.

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269 MCQ for effective preparation of the test of Microeconomics of Economics section.

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