QUESTION 37 If a perfectly competitive firm and a monopolistic competitive firm

Question

QUESTION 37 If a perfectly competitive firm and a monopolistic competitive firm face the same demand and cost curves, then Oa the perfectly competitive firm will not atain resource-allocative efficiency, but the monopolistic competitive firm will. OC. both the perfectly competitive firm and the monopolistic competitive firm will attain resource-allocative efficiency e the perfectly competitive firm will attain resource-allocative efficiency, but the monopolistic competitive fim may or may not, Ob. the perfectly competitive firm will attain resource-allocative efficiency, but the monopolistic competitive firm will not. O d. neither the perfectly competitive firm nor the monopolistic competitive firm will attain resource-allocative efficiency depending upon the demand for its product

Explanation / Answer

Ans) the correct option is b) the perfectly competitive firm will attain resource allocative efficiency but the monopolistic competitive firm will not. in monopolistic competition MR curve is below the demand curve and profit is maximised at a point where MR = MC so less quantity is produced as compared to prefect comptetion because in perfect competition profit is maximised at a point where P = MC

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