It indicates the amount of output by that long run output of the firm under monopolistic competition falls short of the Ideal output. This is regarded as wastage in monopolistic competition.
Excess capacity under imperfect competition emerges due to downward sloping demand curve. It can be tangent only at the falling part of LAC. This means the greater the elasticity of this downward sloping demand curve, lesser would be excess capacity. A firm under monopolistic competition in long run equilibrium generates an output that is less than what is deemed socially optimum or ideal output. Society's productive resources are completely utilised when they produce the output at minimum long run average cost. Though firm under monopolistic competition operates at the output on the falling portion of LAC; that implies it's not operating at minimum LAC point. Yet under perfect competition the firm in long period operates at minimum LAC i.e. Ideal output or socially optimum output.
- Unemployment: Under imperfect competition, production capacity of the firm isn't used fully. This specifies that there is underutilisation of capacity. This results in unemployment.
- Exploitation: Under imperfect competition the output is restricted so that price is kepthigher than marginal cost (AR>MC). The excess of price on MC signifies real extra burden on the community which implies the exploitation. Under perfect competition this exploitation isn't possible as price is equal to AC and MC (AR=MC=AC)
- Advertisement: Expenditure on competition advertisement is treated as a waste of competition. It's the result of imperfect competition because under perfect competition there is no need for such advertisement owing to homogenous products. Although under imperfect competition product is differentiated and consequently advertisement becomes essential in order to earn larger share in the market.
- Cross Transport: The existence of cross transport is another factor contributing to waste of imperfect competition. A firm in US can be a selling a commodity in US whereas the same product produced in US may be sold abroad. This is also the result of absence of perfect competition as well as presence of product differentiates.
- Specialisation: Another waste of imperfect competition is the failure of every firm in US to specialise in production of those commodities for that it's best suited.
- Standardisation: Under imperfect competition, standardisation that helps in reducing cost isn't possible. No produce can take the rich producing particular design on larger.