Answer:
The correct answer is excess capacity.
Explanation:
Monopolistic competition is characterized by a large number of firms. These firms produce differentiated goods which are not perfect substitutes but are close substitutes. The entry into the market is relatively easier than monopoly. These firms are price makers and face a downward-sloping demand curve. They face an excess capacity in the long run as they produce at an output level lower than the low-cost output.
