What does it mean if a firm has excess capacity?
A)That the firm expends too much of its resources on advertising its product without seeing an appreciable increase in sales.
B)That the firm is not producing its minimum efficient scale of output.
C)That the firm's long-run average cost of producing a given quantity exceeds its short-run cost of producing that same quantity.
D)That the firm's quantity supplied exceeds its quantity demanded.

Question

Quizplus · Accepted Answer

Excess capacity occurs when a firm is not producing at its minimum efficient scale of output, meaning it could produce more output with the same resources without increasing its long-run average cost. This can lead to inefficiency and decreased profitability for the firm.

What Does It Mean If a Firm Has Excess Capacity