The output produced by a typical firm is less than what would occur at the minimum point on its atc curve best describes the idea of excess capacity in monopolistic competition. So, the correct answer is option a.
A form of imperfect competition known as monopolistic competition pits numerous producers against one another while still providing goods that are distinguishable from one another (for example, by branding or quality) and are thus not exact substitutes. In monopolistic competition, a business accepts the prices set by its competitors as given and pays no attention to how its own prices affect those of other businesses.
If this occurs in the presence of a coercive government, monopolistic competition will turn into a monopoly that has been granted by the government. In contrast to ideal competition, the business keeps extra capacity. Industry models frequently adopt monopolistic competition models. Restaurants, cereals, apparel, shoes, and service sectors in big cities are a few examples of industries with market systems resembling monopolistic rivalry from textbooks.
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