Question

Excess capacity abounds in such major industries as Telecom, Airline, and Auto manufacturing. Using real-world examples, demonstrate the ramification of excess capacity for a corporation and its customers.

Answer 1

As excess capacity refers to the situation where the firm's production is less than it's optimal production .As this situation shows that the demand for the product is low,so the firm uses excess capacity to attract customers to increase sales.If the firm was getting full capacity then it my have hiked the prices,so it is also beneficial for the consumers.

Excess capacity is used in major monopolistic industries such as telecom,airline and auto industry where the industry has already recovered its fixed cost in the month and uses special prices and offers at the end of month which will cover the variable cost for the firm and incur profit.