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    Question

    When a firm operates with excess

    capacity
    A it must be a perfectly competitive firm Correct Answer Incorrect Answer
    B it must be a monopolist Correct Answer Incorrect Answer
    C it must be a monopolistically competitive firm Correct Answer Incorrect Answer
    D additional production would increase the average total cost Correct Answer Incorrect Answer
    E additional production would lower the average total cost Correct Answer Incorrect Answer

    Solution

    Additional production lowers the average total cost when firm operates with excess capacity.

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