Which Statement Best Explains the Relationship Between Demand and Output

Multiple Choice

Which statement best explains the relationship between demand and output capacity of a firm in a monopolistically competitive market

A) Because it faces a downward-sloping demand curve, it will generally operate with excess capacity.
B) Because it faces a downward-sloping demand curve, it will generally operate at the efficient scale.
C) Because it faces a perfectly elastic demand curve, it will generally operate with excess capacity.
D) Because it faces a perfectly inelastic demand curve, it will generally operate at the efficient scale.