Why does a monopolistically competitive firm not produce efficiently?

The answer is B for sure though the umption is flawed. McDonald's is a monpolistic competitor, yet I would believe that they do achieve about the lowest average total cost regardless of whether a Burger king or Wendy's is on the same block. If you think differently, then imagine there is no other hamburger joints and the one McDonald's is now triple in size. Would that really be more efficient?