Excess capacity is a characteristic of monopolistically competitive firms.What does excess capacity mean?
A)It means that firms do not produce the output level that corresponds to the minimum point on their average total cost curves.
B)It means that firms hire more than the minimum number of workers needed to produce the profit-maximising level of output.
C)It means that firms produce with inefficient combinations of resources.
D)It means that firms build plants that are not large enough to achieve minimum efficient scale.

Question

Quizplus · Accepted Answer

Excess capacity in monopolistically competitive firms refers to their operation at a level of output where they do not achieve the lowest possible average total cost, which is not producing at the minimum point on their average total cost curves.

Excess Capacity Is a Characteristic of Monopolistically Competitive Firms