Excess capacity refers to the

A) amount by which actual production falls short of the minimum ATC output.
B) fact that entry barriers artificially reduce the number of firms in an industry.
C) differential between price and marginal costs that characterizes monopolistically competitive firms.
D) fact that most monopolistically competitive firms encounter diseconomies of scale.

Excess Capacity

The situation where a firm or economy can produce more goods or services than currently produced, indicating under-utilization of resources.

Marginal Costs

The additional cost incurred by producing one more unit of a product, which can vary as production scales.

Diseconomies of Scale

A situation where an increase in production leads to higher average costs for firms, contrary to economies of scale.