His happens not only in industries in which demand is, Microeconomics

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His happens not only in industries in which demand is

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 vola- tile and unpredictable, but also in industries in which demand is fairly stable. What factors lead to overca- pacity? Explain each briefly.

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