If a Monopolistically Competitive Firm Has Excess Capacity

question 7

Multiple Choice

If a monopolistically competitive firm has excess capacity,

• A) it has exhausted all economies of scale.
• B) it is producing beyond the minimum efficient scale.
• C) it is experiences diseconomies of scale.
• D) it produces an output rate that places it on the negatively sloped portion of its average total cost curve.

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Definitions:

Gross Profit

The difference between revenue and the cost of goods sold, indicating the efficiency of a company in producing and selling its products.

Operating Expenses

Costs associated with the day-to-day functioning of a business, such as rent, utilities, payroll, and materials, excluding the cost of goods sold.

Income from Operations

Income from Operations represents the profit earned from a firm's core business activities, excluding deductions of interest and taxes.

Purchase Invoice

A document received by a purchaser confirming the sale of goods or services and indicating the quantities, prices, and terms of sale.