If a Firm Has Excess Capacity,it

question 9

Multiple Choice

If a firm has excess capacity,it

• A) produces less than its efficient scale.
• B) should advertise to maximize profits.
• C) should decrease its markup to increase its profit.
• D) is a perfectly competitive firm.
• E) must face a horizontal demand curve.

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Definitions:

Exclusion of Markup

The practice of not including an additional amount to the cost of goods when pricing them, often to maintain competitive pricing.

Double Marginalization

A pricing issue that occurs when two or more entities in the same supply chain add their markup, leading to higher prices for the end consumer.

Retail Price

The price at which a product is sold to the public, usually after including costs of production, distribution, and a markup for profit.

Ensure Freshness

Measures or practices used to maintain the quality and safety of perishable products.