Excess Capacity in Monopolistic Competition (With Diagram)
Some economists are of the opinion that a firm under monopolistic competition produces, in equilibrium, less than the 'ideal' output, and therefore, it suffers from excess capacity which amounts to wastage. Before going into the details of the problem, let us first see what is meant by ideal output. According to economists like Marshall, Kahn, Harrod, and Cassels, the output [...]