Excess Capacity Is a Problem in Monopolistic Competition Because,if There

question 226

Multiple Choice

Excess capacity is a problem in monopolistic competition because,if there were fewer firms in the industry:

• A)there would be more choices for consumers.
• B)average total costs would be higher and profits would be lower.
• C)average total costs would be lower and the prices paid by consumers could be lower.
• D)there would be less need for government regulation.

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Definitions:

Long-Run Equilibrium

A state in which all factors of production and costs are variable, allowing firms to make adjustments so that supply equals demand, leading to no economic profit in perfect competition.

Marginal Cost

Additional financial obligation incurred by producing another unit of a product or service.

Product-Variety Externality

Occurs when the introduction of new products benefits consumers by expanding their choices, often leading to positive market effects.

Introduction

The initial section or the beginning part of a document, presentation, or text, aiming to give an overview or background of the subject matter.