Efficiency Outcomes for Monopolistic Competition

Allocative Efficiency will not occur in Monopolistic Competition. The profit maximizing firm sets MR = MC, leading to a price above and quantity below those where P = MC.

Productive Efficiency will not occur in Monopolistic Competition with free entry in long run equilibrium. Firms will have excess capacity meaning they produce less than the productively efficient quantity.

Technical Efficiency will occur in long run equilibrium due to free entry.

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