- Refer to Figure 26.3 for a monopolistically competitive firm in the long run.Which of the following observations results in the problem of excess capacity? A)The firm is producing less than the minimum-ATC output rate. B)The firm is producing at Q₃ instead of where MR = MC. C)The firm is earning only zero economic profits in the long run.

Question

Quizplus · Accepted Answer

In monopolistic competition, firms produce less than the minimum-ATC output rate, leading to excess capacity because they do not produce at the lowest point on the average total cost curve.