Use the figure below to answer the following question. Figure 13.2.7
-Refer to Figure 13.2.7.The figure shows the demand,marginal revenue,and cost curves for a monopolistically competitive firm in the long run.The firm has excess capacity of

Question

Use the figure below to answer the following question.  Figure 13.2.7
-Refer to Figure 13.2.7.The figure shows the demand,marginal revenue,and cost curves for a monopolistically competitive firm in the long run.The firm has excess capacity of

Quizplus · Accepted Answer

Excess capacity occurs when the quantity produced is less than the quantity at which average total cost is at the minimum. In this case, the minimum point of the average total cost curve occurs at a quantity of 12 units. However, at the profit-maximizing quantity of 8 units, average total cost is higher than the minimum, indicating excess capacity of 4 units (12-8=4). Therefore, the answer is B.

Use the Figure Below to Answer the Following Question