Excess Capacity Refers to the

question 137

Multiple Choice

Excess capacity refers to the

• A) amount by which actual production falls short of the minimum ATC output.
• B) fact that entry barriers artificially reduce the number of firms in an industry.
• C) differential between price and marginal costs that characterizes monopolistically competitive firms.
• D) fact that most monopolistically competitive firms encounter diseconomies of scale.

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Definitions:

Direct Labor Cost

The wages and benefits paid to workers who are directly involved in the production of goods or the provision of services.

Work in Process Inventory

Goods that are in the midst of production and not yet complete at the conclusion of an accounting cycle.

Direct Labor-Hours

The aggregate amount of time spent by staff members who are directly part of the production activity.

Manufacturing Overhead

All indirect costs associated with the manufacturing process, including costs incurred in the factory that are not directly tied to a specific product.