Question

Which of the following is correct?

a. The greater the degree of product variation, the lesser is the excess capacity problem.
b. The greater the degree of product variation, the greater is the excess capacity problem.
c. The excess capacity problem diminishes as the monopolistically competitive firm's demand curve becomes less elastic.
d. The excess capacity problem means that monopolistically competitive firms typically produce at some point on the rising segment of their average total cost curve.

Answer 1

The correct answer is b) "The greater the degree of product variation, the greater is the excess capacity problem."

Step-by-step explanation:

Excess capacity means that the demand for a stock is less than the quantity that the company probably could provide to the market.

• The greater the degree of product variation, the greater is the excess capacity problem.

• A lower scale of output than it has been designed for creates an excess of capacity.