Which of the Following Best Describes the Idea of Excess

question 36

Multiple Choice

Which of the following best describes the idea of excess capacity in monopolistic competition?

• A)Firms produce more output than is socially desirable.
• B)The output produced by a typical firm is less than what would occur at the minimum point on its ATC curve.
• C)Due to product differentiation,firms choose output levels at which P > ATC.
• D)Firms keep some surplus output on hand in case there is a shift in demand for their product.
• E)The collective output of all firms in the market typically exceeds the quantity demanded.

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Definitions:

Inelastic Demand

A situation where demand for a product or service is relatively unmoved or less sensitive to changes in price.

Elastic Supply

A situation where the quantity of a good supplied by producers changes significantly in response to a small change in price.

Tax Burden

The measure of taxes paid as a proportion of income or the overall economic impact of taxes on an individual or business.

Own Price Elasticity

A measure of the responsiveness of the quantity demanded of a good to a change in its own price.