The difference between the least cost output and actual output level is termed as____.

Excess capacity

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Unbalanced capacity

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Balance capacity

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Bottleneck capactiy

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Solution

The correct option is A Excess capacity
The least cost output is the level of optimal efficiency. This is achieved when all factors of production are employed in their most productive form. Thus when the average cost is higher than least cost it signifies the presence of inefficiencies in the economy. and thus the gap is termed as excess capacity as all resources are not employed in the most optimal way.

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What happens to the difference between total cost and total variable cost as output is increased?

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As output rises, the difference between total cost and total variable cost tends to fall.

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