Asked by Melonie Johnson on Apr 24, 2024
Verified
Monopolistically competitive firms produce less than the output at which average total cost is minimized in the long run.As a result,there is:
A) irrational capacity.
B) excess capacity.
C) product differentiation.
D) zero economic profit.
Excess Capacity
The situation where a firm or economy can produce more goods or services than currently demanded, often leading to underutilization of resources.
Average Total Cost
The total cost of production divided by the total output, representing the cost per unit of production.
- Acquire knowledge about the ideas of excess capacity and profit margins in diverse market frameworks.
- Gain insight into the motivations for and implications of excess capacity in the context of monopolistic competition.
Verified Answer
ZK
Zybrea KnightMay 02, 2024
Final Answer :
B
Explanation :
Monopolistically competitive firms produce less than the output at which average total cost is minimized in the long run due to product differentiation, which creates a downward sloping demand curve. This results in excess capacity, where firms operate below their full efficiency level, leading to higher average total cost than necessary.
Learning Objectives
- Acquire knowledge about the ideas of excess capacity and profit margins in diverse market frameworks.
- Gain insight into the motivations for and implications of excess capacity in the context of monopolistic competition.
Related questions
The Excess Capacity in Monopolistic Competition May Be Viewed As ...
The Price in Long-Run Equilibrium for a Monopolistically Competitive Firm ...
Monopolistic Competition in an Industry Will Result in _____ Because ...
Excess Capacity Is a Problem in Monopolistic Competition Because,if There ...
When the Profit-Maximizing Level of Output Is Less Than the ...