Whats an example of excess capacity in economics?
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whats an example of excess capacity in a monopolistically competitive industry?! hope you can help thank you
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Answer:
A situation in which actual production is less than what is achievable or optimal for a firm. This often means that the demand in the market for the product is below what the firm could potentially supply to the market. Good example: The new GM VOLT. Nobody wants the thing and they are building a bigger factory to manufacture more. Your government and unions in action.
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Other answers
In a monopolistic competitive society, you can have excess capacity where demand ios far below capacity. This may be due to low purchasing power, economic recession where even though there is monopoly, the capacity to purchase isn't there and so supply is below the optimum.
Kunle
Production can be increased without increasing its fixed inputs. In monopolistic competitive market more firms are competing for market share. As a result it is common thing that excess capacity prevail for some firms.
Sipra M
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