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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 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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