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EXCESS CAPACITY: A condition that exists when monopolistic competition achieves long-run equilibrium such that production by each firm is less than minimum efficient scale. The implication of this condition is that each firm is not producing up to its fullest capacity, as would be the case under perfect competition, and thus more firms are need to produce total market output compared to perfect competition. Excess capacity results because market control means a monopolistically competitive firm faces a negatively-sloped demand curve. Long-run equilibrium is thus achieved by the tangency of the negatively-sloped demand curve and the long-run average cost curve, which results in economies to scale.
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LAW OF INCREASING OPPORTUNITY COST The proposition that opportunity cost, the value of foregone production, increases as the quantity of a good produced increases. This fundamental economic principles can be seen in the production possibilities schedule and is illustrated graphically through the slope of the production possibilities curve. It generates a distinctive convex shape, flat at the top and steep at the bottom.
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Today, you are likely to spend a great deal of time looking for a downtown retail store looking to buy either a genuine fake plastic Tiffany lamp or a microwave over that won't burn your popcorn. Be on the lookout for letters from the Internal Revenue Service.
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Two and a half gallons of oil are needed to produce one automobile tire.
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"Every generation of Americans needs to know that freedom exists not in doing what we like, but in having the right to do what we ought. " -- Pope John Paul II
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