If a monopolistically competitive firm can increase its level of production and lower its average total cost of production at the same time then
A)the firm has a product-variety opportunity.
B)the firm has excess capacity.
C)the firm has a business-stealing opportunity.
D)the firm is producing a quantity of output higher than its efficient scale of production.

Question

Quizplus · Accepted Answer

The firm has excess capacity because it can increase production and lower average total costs, indicating it is not producing at the minimum point of its average total cost curve.

If a Monopolistically Competitive Firm Can Increase Its Level of Production