In monopolistic competition excess capacity in the firm_______.
  • a)
    Always Exists
  • b)
    Sometimes Exists
  • c)
    Never Exists
  • d)
    None of the above
Correct answer is option 'C'. Can you explain this answer?

CA Foundation Question

3 Answers
Kunal Arora answered Nov 04, 2019
In monopolistic competition firm is not an optimum firm I. e. it has some excess and unused capacity so answer is b

Vivek Vivek answered Aug 10, 2020
Never exists because the monopolist can control either price or quantity. If he increases quantity to optimum level then profits increases.

Suraksha Pahwa answered Sep 20, 2018
Excess capacity refers to a situation where a firm is producing at a lower scale of output than it has been designed for. Context: ... It may arise because as demand increases, firms have to invest and expand capacity in lumpy or indivisible portions.

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