Excess capacity exists when a firm produces
A) more than the profit-maximizing level of output.
B) less than the quantity that minimizes average total cost.
C) less than the quantity that minimizes marginal cost.
D) more than the quantity that minimizes marginal cost.
E) None of the above answers is correct.

Question

Quizplus · Accepted Answer

Excess capacity occurs when a firm produces less than the quantity that minimizes average total cost, indicating that the firm is not operating at its most efficient scale.

Excess Capacity Exists When a Firm Produces