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Business, 14.12.2019 00:31 kaizodude

Many industries are often plagued by overcapacity: firms simultaneously invest in capacity expansion, so that total capacity far exceeds demand. this happens not only in industries in which demand is highly volatile and unpredictable, but also in industries in which demand is fairly stable. what factors lead to overcapacity? explain. overcapacity may result

a. from firms producing a differentiated product in a monopolistically competitive market.
b. when demand grows by more than expected.
c. from new firms entering an industry, producing additional output to maximize its own profit.
d. from firms following dominant strategies to maximize payoffs.
e. from firms trying to prevent entry by making production appear unprofitable.

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