Question

If a perfectly competitive firm and a monopolistic competitive firm face the same demand and cost...

If a perfectly competitive firm and a monopolistic competitive firm face the same demand and cost curves, then

Group of answer choices

neither the perfectly competitive firm nor the monopolistic competitive firm will attain resource-allocative efficiency.

both the perfectly competitive firm and the monopolistic competitive firm will attain resource-allocative efficiency.

the perfectly competitive firm will attain resource-allocative efficiency, but the monopolistic competitive firm may or may not, depending upon the demand for its product.

the perfectly competitive firm will not attain resource-allocative efficiency, but the monopolistic competitive firm will.

the perfectly competitive firm will attain resource-allocative efficiency, but the monopolistic competitive firm will not.

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Homework Answers

Answer #1

Perfectly competitive firm will attain resource allocative efficiency because it charges Price which is equal to its Marginal Cost. Thus, the output produced by the Perfectly Competitive firm is efficient.

But the Monopolistic Competitive Firm will never attain allocative Efficiency as it charges a price which is greater than its Marginal Cost. Thus, the output produced by Monopolistic Competitive Firm is not efficient.

Thus, Fifth Option is correct i.e., the Perfectly Competitive Firm will attain resource allocative Efficiency but the Monopolistic Competitive Firm will not.

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