The excess capacity theorem holds for a (n) __________, and states that in the long run the firm produces an output __________.
A)perfectly competitive firm; that is resource-allocative efficient
B)monopoly firm; that is not resource-allocative efficient
C)monopolistic competitor; smaller than the one that would minimize its costs of production
D)oligopoly firm; larger than the one that would minimize its costs of production
E)none of the above

Question

Quizplus · Accepted Answer

The excess capacity theorem specifically applies to monopolistic competition, stating that such firms produce at a level of output that is less than what would be necessary to achieve minimum average costs, leading to excess capacity.

The Excess Capacity Theorem Holds for a (N) __________, and States