When a firm in a monopolistically competitive market is operating at excess capacity it implies that:
A)it is producing the efficient level of output.
B)it is producing more than the competitive level of output
C)it can produce output at a lower cost
D)it is facing an upward-sloping average cost curve

Question

Quizplus · Accepted Answer

When a firm in a monopolistically competitive market is operating at excess capacity, it means it is not utilizing all of its resources efficiently and thus has the ability to produce more output at a lower average cost. This is because it is not operating at the minimum point of its average total cost curve.

When a Firm in a Monopolistically Competitive Market Is Operating