Question

Which of the following real-world situations is the result of excess capacity in a monopolistically competitive market?

a. A factory producing women's clothing produces more than it can sell during a season.
b. Gas stations with infrequently used pumps are located at all four corners of an intersection.
c. A retail auto tire store orders too much inventory.
d. Monopolistically competitive firms do not exist in the real world.

Answer 1

b. Gas stations with infrequently used pumps are located at all four corners of an intersection.

Step-by-step explanation:

A monopolistic competition is when there are many firms selling differentiated products in an industry.

examples of monopolistic competition are restaurants

Excess capacity occurs when in long-run a firm produces output that is less than socially optimum. it is when firms do not produce at the level of output at which long-run average cost is minimum.