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Answer : 2. "Long run average cost curve"
Under perfect competition, the industry has no excess capacity because each firm produces at its minimum point.
5Q:
Under perfect competition, the industry has no excess capacity because each firm produces at its minimum point.
- 1Long run marginal cost curvefalse
- 2Long run average cost curvetrue
- 3Long run average variable cost curvefalse
- 4Long run average income curvefalse
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Answer : 2. "Long run average cost curve"
Explanation :
Excess capacity in simple terms is when a firm is producing below it's full production potential. So under perfect competition, all firms produce at minimum point where the long-run average cost curve, marginal revenue, average revenue and horizontal demand curve are tangent.