Asked by AssignmentsWiz - Educational Services on Jun 23, 2024
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The term excess capacity refers to the fact that a firm operates on the upward-sloping portion of its average-total-cost curve.
Excess Capacity
A situation where a firm or an economy can produce more goods or provide more services than currently being produced, due to unused resources.
Average-Total-Cost Curve
A graphical representation showing the average total cost per unit of output at different levels of production.
- Describe the concept of excess capacity and its implications for firms in monopolistically competitive markets.
Verified Answer
BF
Best for ever AfghanJun 26, 2024
Final Answer :
False
Explanation :
Excess capacity refers to a situation where a firm is producing at a level of output that is less than the level associated with minimum average total cost, indicating underutilization of resources, not necessarily operating on the upward-sloping portion of its average-total-cost curve.
Learning Objectives
- Describe the concept of excess capacity and its implications for firms in monopolistically competitive markets.
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