ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Because there is a lack of investment, the firms may become static – there is no improvement in productivity and no reduction in costs over time; this makes them dynamically inefficient.

Detailed explanation-2: -Profit-maximizing firms in perfectly competitive demonstrate both productive and allocative efficiency. In the long run in a perfectly competitive market, because of the process of entry and exit, the price in the market is equal to the minimum of the long-run average cost curve.

Detailed explanation-3: -In a perfect competition, firms produce an output quantity where the marginal cost of the last unit produced is equal to the marginal revenue of the product. For a price-taking firm, the marginal revenue is equal to the market price.

Detailed explanation-4: -A monopolistically-competitive market is productively inefficient market structure because marginal cost is less than price in the long run.