The term excess capacity refers to the fact that a firm produces a lower quantity than it would if it operated at the efficient scale.

Name: The term excess capacity refers to the fact that a firm produces a lower quantity than it would if it operated at the efficient scale.
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Excess capacity occurs when a firm produces at a level below its efficient scale, meaning it has the capability to produce more than it currently does without increasing average costs.

The Term Excess Capacity Refers to the Fact That a Firm