B. Efficiency under Imperfect Competition Under Imperfect competition, a firm faces a downward sloping demand curve as well as marginal revenue curve. Under such conditions, the firm wants to maximize its profits by restricting its output. In equilibrium, a firm may not necessarily produce at the minimum point of its long run average cost. Thus, the firm is productively inefficient under imperfect competition. Also, a firm is allocation inefficient in the long run under imperfect competition. This is because the firm faces a downward sloping demand curve and its marginal revenue is less than the average revenue. Equilibrium occurs where marginal revenue equals the marginal cost curve. Marginal revenue falls much more quickly than average revenue (price) as output increases, and thus, price will be greater than the marginal costs at the equilibrium output level. Since P>MC, firms are allocation inefficient under imperfect competition. Fig 3 Equilibrium under Monopoly NOAll Post Graduate Cou MC Pm AC AC A Gate MR D=AR Q Qm Figure 3 plots the equilibrium of a monopoly firm. Here both the AR and MR curves are downward sloping and equilibrium occurs at an output level where MR =MC. Since, P>AC >MC at the equilibrium output level, thus, the firm under monopoly is neither productively nor allocationy efficient