displays productive efficiency: goods are produced at the lowest possible average cost. However, in

monopolistic competition, the end result of entry and exit is that firms end up with a price that lies on the

downward-sloping portion of the average cost curve, not at the very bottom of the AC curve. Thus, monopolistic

competition will not be productively efficient.

In a perfectly competitive market, each firm produces at a quantity where price is set equal to marginal cost,

both in the short and long run. This outcome is why perfect competition displays allocative efficiency: the

social benefits of additional production, as measured by the marginal benefit, which is the same as the price,

equal the marginal costs to society of that production. In a monopolistically competitive market, the rule for
{"file_type": ".pdf", "creator": "PDFMiner", "total_pages": 597, "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "moddate": "2022-12-07T14:23:05-06:00", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "file_size_mb": 26.99, "title": "Principles of Microeconomics 3e", "uploaded_via": "batch_uploader", "producer": "Prince 14.2 (www.princexml.com)", "file_name": "Microeconomics3e.pdf", "creationdate": "2022-12-07T14:15:44-06:00", "upload_timestamp": "2026-02-07T15:37:44.339247", "batch_upload": true, "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a"}