Monopolistically competitive firms are inefficient because they produce a lower level of output at a higher average cost than do perfectly competitive firms produce a lower level of output at a higher average cost than do perfectly competitive firms A use production processes that are more capital-intensive than do perfectly competitive firms use production processes that are more capital-intensive than do perfectly competitive firms B face downward-sloping demand curves, ensuring that marginal revenue is greater than average revenue face downward-sloping demand curves, ensuring that marginal revenue is greater than average revenue C produce at that level of output where price equals marginal cost produce at that level of output where price equals marginal cost D realize diseconomies of scale