The correct answer is: A. Monopoly
Excess capacity is a situation in which a firm produces less output than it could produce at the minimum average cost. This can happen for a number of reasons, such as when a firm is trying to maintain a high price or when it is facing a decrease in demand.
Monopolies are firms that have a large market share and can therefore charge a high price without fear of losing customers to competitors. This means that they have no incentive to produce at the minimum average cost, and they may instead choose to produce at a lower level of output in order to maximize profits.
B. Monopolistic competition is a market structure in which there are a large number of firms selling similar but not identical products. Firms in monopolistic competition have some market power, but not as much as a monopoly. This means that they can charge a price above marginal cost, but they cannot charge a price that is too high, or they will lose customers to competitors.
C. Perfect competition is a market structure in which there are a large number of firms selling identical products. Firms in perfect competition have no market power, and they must therefore charge a price equal to marginal cost. This means that they cannot produce at an output level that results in excess capacity.
D. Oligopoly is a market structure in which there are a small number of firms selling similar or identical products. Firms in oligopoly have a great deal of market power, and they can therefore charge a price above marginal cost. This means that they may choose to produce at an output level that results in excess capacity.