A ﬁrm that is operating with excess capacity is likely to have a high price elasticity of supply.

Question

Quizplus · Accepted Answer

If a firm is operating with excess capacity, it means that it has the ability to quickly and easily increase production without incurring significant additional costs. This makes it more likely that the firm will be able to respond to changes in demand by increasing supply, resulting in a higher price elasticity of supply.

A ﬁRm That Is Operating with Excess Capacity Is Likely