Define “ Excess capacity”?

1.	Define “ Excess capacity”?
Answer» 1. Excess capacity is the difference between the optimum output that can be produced and the actual output produced by the firm. 2. In the long run, a monopolistic firm produces deliberately output which is less than the optimum output that is the output corresponding to the minimum average cost. 3. This leads to excess capacity which is actually a waste in monopolistic competition.

Answer»

1. Excess capacity is the difference between the optimum output that can be produced and the actual output produced by the firm.

2. In the long run, a monopolistic firm produces deliberately output which is less than the optimum output that is the output corresponding to the minimum average cost.

3. This leads to excess capacity which is actually a waste in monopolistic competition.

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Define “ Excess capacity”?

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