It is inefficient as its production is not at the minimum of its average cost curve.
In what ways is a monopolistically competitive firm inefficient?
Because it does not produce at the minimum of its average cost curve or where P = MC, a monopolistically competitive firm is inefficient. As a result, a monopolistically competitive firm would typically produce less at a higher cost and charge more than a perfectly competitive firm.
Is monopolistic competition more efficient than monopoly?
The market is less productively and allocatively efficient than a monopoly, but more so than the ideal competition. However, they might also be dynamically inventive in terms of new products or production methods.
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