The term excess capacity refers to the fact that a firm operates on the upward-sloping portion of its average-total-cost curve.

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Excess capacity refers to a situation where a firm is producing at a level of output that is less than the level associated with minimum average total cost, indicating underutilization of resources, not necessarily operating on the upward-sloping portion of its average-total-cost curve.

The Term Excess Capacity Refers to the Fact That a Firm