What is excess capacity? What industry has excess capacity in the long run: perfect competition or monopolistic competition?
What will be an ideal response?
The efficient scale of output is the level that minimizes the average total cost. Excess capacity occurs if the firm produces less than the efficient scale. In this case, the firm could boost its output and lower its average total cost. Firms in monopolistic competition have excess capacity. Firms in perfect competition produce at the minimum of the average total cost. They produce at the efficient scale of output and so do not have excess capacity.
You might also like to view...
In 2008, the Fed created a new policy tool called
A) federal funds zero-rate, which required the Fed to lower the rate to near zero percent. B) open market operations, which required the Fed to buy securities from only the federal government. C) quantitative easing, which required the Fed to pay interest on required reserves. D) interest rate reductions, which allowed the Fed to lower interest rates paid to banks. E) quantitative easing, which allowed the Fed to buy private securities as well as government securities.
You hear a candidate for the U.S. Congress state that a tax on stocks is an equitable way for the government to raise revenue because it only affects the very wealthy. Evaluate this statement
Suppose the Inkuyo family invests in the local bottling corporation. Albert, Brad, Carol, and Diana each invest separately. At the end of a very successful quarter, Carol and Brad receive a payment from the corporation equal to 10 percent of their investment. Albert receives 7 percent, but is paid before Carol or Brad. Diana receives 6 percent. If Diana receives her money before Albert, she must
have invested in a. common stock b. preferred stock c. convertible stock d. corporate bonds e. low-yield dividends
"The government should eliminate income inequality" is an example of
A. a positive statement. B. a normative statement. C. a realistic argument. D. a factual statement.