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Excess capacity is producing more than the market needs and are seen often in horizontal mergers due to supply increasing faster than the increase in demand.
I can't draw a graph on here I believe, but firms expanded so that they had the capacity to produce at Qcapacity, but market demand and many firms forced the firm to produce at Q' (higher LRAC) leading to excess capacity.
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∙ 14y ago
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A graph of a complementary good in economics?
A graph of complimentary goods in economics represents the relationship between the price of of commodity & demand for it's complementary. Thus it shows a inverse relationship.
What does it mean if a firm has excess capacity?
a firm has excess capacity if it produces below its efficient scale, whcih is the quantity at which total cost is a minimum.
What is a cross section graph?
a cross section graph shows the values of an economics variables for diffrent categories t a point in time
In economics while drawing PPC graph money flow is?
Outer loop.
In economics while drawing PPC graph real flow is?
Inner loop.
Why economics graph is different from maths graph?
There is no difference.
What is the meanings of capacity in economics?
yes
A graph of a complementary good in economics?
A graph of complimentary goods in economics represents the relationship between the price of of commodity & demand for it's complementary. Thus it shows a inverse relationship.
What does it mean if a firm has excess capacity?
a firm has excess capacity if it produces below its efficient scale, whcih is the quantity at which total cost is a minimum.
What is a cross section graph?
a cross section graph shows the values of an economics variables for diffrent categories t a point in time
In economics while drawing PPC graph money flow is?
Outer loop.
In economics while drawing PPC graph real flow is?
Inner loop.
Which basic production planning strategy will build inventory and avoid the costs of excess capacity?
Which basic production strategy will build inventory and avoid the costs of excess capacity
What would carrying capacity look like on a line graph?
It depends on what the carrying capacity is plotted against.
What does the k-line represent on a population graph?
The k-line on a population graph represents carrying capacity. Carrying capacity refers to the number of people that can be supported without destroying the ecosystem.
Why don't oil refineries operate at full capacity?
In the early 2000's there was almost no excess global refining capacity. The reason for the lack of excess capacity was that the industry had not added any capacity since the 70's. The lack of added capacity was due to the fact that since the 70's a huge amount of excess capacity had existed. It took almost 20 years for demand to catch up with excess capacity and the refining industry suffered low profits from the 1970's until 2002. When the demand caught up new refineries were built and they are beginning to come on line and are the reason for the increase in excess capacity. The capacity of a refinery to produce oil is increased with new innovations in the refining process and the removal of bottle necks within the system. Excess capacity is built into refineries to meet future demand. Assuming that oil refineries don't operate at full capacity to make more money and drive up prices is a false assumption. History shows that the profit margin for a refinery decreases as excess capacity increases. The global oil industry's growing challenges to increase crude production to meet demand and fill excess capacity is a much more likely source of high prices.
Under which market condition do firms have excess capacity?
duopoly
