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Question
Under perfect competition, the industry does not have any excess capacity because each firm produces at the minimum point on its ________.
Under perfect competition, the industry does not have any excess capacity because each firm produces at the minimum point on its ________.
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Solution
The correct option is B long-run average cost curve
Excess capacity in simple terms is when a firm is producing below it's full production potential. So under perfect competition, all firms produce at minimum point where the long run average cost curve, marginal revenue, average revenue and horizontal demand curve are tangent. At the this point the production is to its full capacity and it's at the minimum point on the long run average cost curve.
Excess capacity in simple terms is when a firm is producing below it's full production potential. So under perfect competition, all firms produce at minimum point where the long run average cost curve, marginal revenue, average revenue and horizontal demand curve are tangent. At the this point the production is to its full capacity and it's at the minimum point on the long run average cost curve.
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