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Under perfect competition, the industry does not have any excess capacity because each firm produces at the minimum point on its
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- long-run marginal cost curve
- long-run average cost curve
- long-run average variable cost curve
- long-run average revenue curve
- long-run marginal cost curve
Correct Option: B
Under perfect competition, the firms operate at the minimum point of long-run average cost curve. In this way, the actual long-run output of the firm under monopolistic competition falls short of what is produced under perfect competition which can be considered the socially ideal output. This gives the measure of excess capacity which lies unutilized under imperfect competition.
