Which of the Following Statements Is True Regarding Excess Capacity

question 160

Multiple Choice

Which of the following statements is true regarding excess capacity?

• A) Firms usually have excess capacity when the demand for the product is very high.
• B) Excess capacity exists because the product is extremely useful and cheap but has no competitors.
• C) If the demand of a product falls, excess capacity declines.
• D) If the demand for a firm's product is stable, then excess capacity is likely to increase.
• E) Excess capacity can be a safety net if demand suddenly picks up.

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Definitions:

Profit-Maximizing Quantity

The point of production where a firm reaches its maximum profit potential.

Panel

A group of individuals or experts gathered to discuss, analyze, or make decisions on specific subjects.

Intersection

The point at which two lines or paths cross each other.

Economic Loss

The difference between the cost of inputs and the revenues received from outputs, indicating a negative outcome in financial performance.