Option D. average total cost is not at its lowest.
Under monopolistic competition, at the profit-maximizing level of output, the average total cost (ATC) curve is not at its lowest point. Firms are productively efficient under perfect competition.
A monopolistically competitive firm might be said to be marginally inefficient because the firm produces at an output where the average total cost is not a minimum. A monopolistically competitive market is a productively inefficient market structure because marginal cost is less than the price in the long run.
Productive efficiency occurs when a market is using all of its resources efficiently. This occurs when a product's price is set at its marginal cost, which also equals the product's average total cost.
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