Asked by Jackson Willis on Jul 11, 2024
Verified
The excess capacity problem associated with monopolistic competition implies that fewer firms could produce the same industry output at a lower total cost.
Excess Capacity Problem
A situation where a firm has more production capacity than needed to meet demand, leading to inefficient use of resources.
Monopolistic Competition
An economic setup in which several companies offer products that are closely related but not exactly the same, granting them a certain level of influence over the market.
- Assess the enduring economic impacts on businesses within various market frameworks.
Verified Answer
KH
Kelly HeeralallJul 11, 2024
Final Answer :
True
Explanation :
In monopolistic competition, firms have some market power and engage in non-price competition, leading to excess capacity, i.e., firms produce at a lower level of output than the one that would minimize their average total cost. This implies that fewer firms could produce the same industry output at a lower total cost, as they would not waste resources on product differentiation and advertising.
Learning Objectives
- Assess the enduring economic impacts on businesses within various market frameworks.
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