What are the disadvantages of monopolistic competition?

Answer 1

There are several potential disadvantages associated with monopolistic competition. They are

1. Some differentiation does not create utility but generates unnecessary waste, such as excess packaging. Advertising may also be considered wasteful, though most is informative rather than persuasive.
2. There is allocative inefficiency in both the long and short run. This is because price is above marginal cost in both cases. In the long run the firm is less allocatively inefficient, but it is still inefficient.