Question

Explain the excess capacity under monopolistic competition.

Answer 1

question :-

⏩Theory of Excess Capacity under Monopolistic Competition! ...

Answer:-

⏩The doctrine of excess (or unutilised) capacity is associated with monopolistic competition in the long- run and is defined as “the difference between ideal (optimum) output and the output actually attained in the long-run.”

Answer 2

Explanation:

Ideal output is the output at which long-run average cost is minimum. Therefore, the firm is producing MN less than the ideal output. Thus MN output represents the excess capacitywhich emerges under monopolistic competition. It is worth nothing that the concept of excess capacity refers only to the long run.