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-maximizing 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 means that they do not produce at the output level that corresponds to the minimum point on their average total cost curves, leading to underutilization of resources.

Excess Capacity Is a Characteristic of Monopolistically Competitive Firms