The 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.
Neither allocative nor productive efficiency will be achieved by monopolistically competitive firms in the long run. We know that allocative efficiency occurs where MB=MC (or MSB=MSC). On the graph, MSB is measured by the demand (or price) curve and the MSC is measured by the MC curve.
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