The Excess-Capacity Theorem Predicts That

question 83

Multiple Choice

The excess-capacity theorem predicts that

• A)when price-taking firms maximize their profits by setting price equal to marginal cost,each firm operates with some excess capacity.
• B)long-run equilibrium in a monopolistically competitive industry occurs with all firms producing at a lower output level than that which minimizes average total costs.
• C)profit-maximizing firms will always choose to operate with some degree of excess capacity,in order to be flexible in the face of shifts in demand.
• D)monopolistic firms will achieve positive economic profits by restricting output below the economically efficient level at which average total costs are minimized.
• E)all firms in a perfectly competitive industry will produce at a lower output level than that which minimizes average total costs.

---

Definitions:

Crucifixion

An ancient method of capital punishment where the victim is tied or nailed to a large wooden beam and left to hang until eventual death.

Paternalism

A moral position developed during the first half of the nineteenth century which claimed that slaves were deprived of liberty for their own “good.” Such a rationalization was adopted by some slaveowners to justify slavery.

Defense of Slavery

Justifications and arguments made to support and uphold the institution of slavery, often rooted in economic, social, or racial ideologies.

Sectional Conflict

Disputes and disagreements between different geographic, cultural, or economic regions within a country, often exemplified by the North-South divide in the United States over issues like slavery.