If a Firm Has Excess Capacity, Then

question 119

Multiple Choice

If a firm has excess capacity, then

• A)the firm expends too much of its resources on advertising its product without seeing an appreciable increase in sales.
• B)the firm is not producing its minimum efficient scale of output.
• C)the firm's long-run average cost of producing a given quantity exceeds its short-run cost of producing that same quantity.
• D)the firm's quantity supplied exceeds its quantity demanded.

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Definitions:

Recession

A temporary economic slump, associated with a drop in business and manufacturing activities, commonly distinguished by a successive decline in GDP across two quarters.

Cyclical Unemployment

Cyclical unemployment is the component of overall unemployment that results from economic recessions or expansions, influenced by the business cycle.

Economy

An area or system in which goods and services are produced, distributed, and consumed by various agents, encompassing local to global scales.

Recession

A significant decline in economic activity spread across the economy, lasting more than a few months, typically visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.