Asked by Mariela Arches on Jun 23, 2024
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Excess capacity characterizes firms in monopolistically competitive markets, even in situations of long-run equilibrium.
Excess Capacity
The situation where a firm produces less than its total output capacity, often due to lack of demand.
Monopolistically Competitive
A market structure where many firms sell products that are similar but not identical, allowing for some degree of market power and price setting.
Long-Run Equilibrium
A state in which all inputs can be adjusted by firms, market supply equals demand, and there is no incentive for economic actors to alter their behavior.
- Discern the situations indicative of efficient operation at scale and excessive capacity in business entities.
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Learning Objectives
- Discern the situations indicative of efficient operation at scale and excessive capacity in business entities.
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