-The figure above shows the cost, marginal revenue, and demand curves of Golden Chow, a producer of dog food. The market for dog food is monopolistic competition. In the long run as new firms enter, Golden Chow cuts its output to 200 cans per day. Its excess capacity is ________ cans per day.

Question

Quizplus · Accepted Answer

In monopolistic competition, firms have excess capacity in the long run. If Golden Chow cuts its output to 200 cans per day, the excess capacity is the difference between the output at minimum average total cost and the current output, which is likely between 201 and 400 cans per day.

-The Figure Above Shows the Cost, Marginal Revenue, and Demand