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Firms in monopolistic competition and in perfect competition have excess capacity.
Excess Capacity
Excess capacity occurs when a firm's actual production is less than its maximum possible output, often indicating underutilized resources or insufficient demand.
Perfect Competition
An economic model describing a market where no buyer or seller has the market power to influence prices, characterized by many participants and free entry and exit.
- Understand the impact of short-term and long-term equilibria on earnings within monopolistic competitive markets.
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Learning Objectives
- Understand the impact of short-term and long-term equilibria on earnings within monopolistic competitive markets.
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