Excess Capacity Arises When Firms Cannot Sell All of Their

question 106

True/False

Excess capacity arises when firms cannot sell all of their output at the current market price.

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Definitions:

Average Variable Cost

The total variable costs (costs that change with the level of output) divided by the quantity of output produced, indicating the variable cost per unit of output.

Marginal Cost Curve

A graphical representation that shows how the cost of producing one more unit of a good varies as production increases.

Industry Supply Curve

A graphical representation showing the total quantity of a good that firms in a particular industry are willing and able to supply at different price levels.

Price of An Input

Price of An Input refers to the cost associated with the resources used in the production of goods and services, such as raw materials, labor, and energy.