If there is excess capacity in a production facility, it is likely that the firm's supply curve is a. price inelastic b. price elastic c. unit price elastic d. none of the answer choices

When a production facility has excess capacity, it means the firm is not utilizing all of its available resources and can increase production without incurring significant additional costs. This flexibility allows the firm to respond more readily to changes in price. **Implications for the Supply Curve:** - **Elastic Supply:** A supply curve is considered elastic if the quantity supplied responds strongly to changes in price. Excess capacity provides the firm with the ability to increase or decrease production easily, making the supply more responsive to price changes. - **Inelastic Supply:** Conversely, an inelastic supply curve indicates that the quantity supplied is relatively unresponsive to price changes, which is typically not the case when there is excess capacity. Given that excess capacity indicates the firm can adjust production levels without substantial cost or delay, the firm's supply curve is likely to be **price elastic**. **Correct Answer:** **b. price elastic**