The Excess Capacity Theorem States That a Monopolistic Competitor

question 133

Multiple Choice

The excess capacity theorem states that a monopolistic competitor

• A)will produce an output level smaller than the one that would minimize its unit costs.
• B)will produce an output level where MR > MC.
• C)generally does not attain long run equilibrium, and thus charges a higher price than it should.
• D)typically produces too much of a good at too low a quality.

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Definitions:

Trust

A fiduciary relationship in which one party, known as a trustee, holds property or assets for the benefit of another party, the beneficiary.

Relationship

The way in which two or more concepts, objects, or people are connected, or the state of being connected or related.

Assent

Agreement or approval, typically given willingly by a person who possesses the capacity to form intent.

Unilateral Mistake

An error made by only one party in a contract that does not necessarily invalidate the agreement, but may be grounds for its rescission if certain conditions are met.