Monopolistic Competition

Under monopolistic competition, efficient all nation of resources is not possible as under perfect  competition .. Under monopolistic competition. the demand curve is not tangential to the average cost  survey  at its lowest or optimum point. On the other hand demand curve is tangential to the average cost   curve at a point higher than the optimum scale point Since the  levels of output produced are not optimum the location  of productive resources under monopolistic  competition cannot be termed efficient On the   the hand there is underutilization of capacity If social welfare is to be maximized there must be fullest of the installed capacity So far as there is product differentiation monopolistic  competition is better perfect competition  from the point of social welfare because variety in the products is calculated to  better satisfaction  to the consumers of diverse tastes and temperaments. If the excess capacity under   monopolistic competition  is diverted to the production of a variety of goods it will promote greater social welfare than it would be  possible under perfect competition.

Monopolistic Competition

Monopolistic Competition