The primary advantage that excess capacity confers on existing firms is A. a lower cost of production than potential entrants
B. the ability to employ cost-plus pricing methods in the event of entry. C. the ability to threaten fierce price competition in the event of entry.
D. the ability to maximize profits with minimal effort.
E. the presence of economies of scale.
Generally speaking, the two advantages of excess capacity are:
1) a threat to competitors that additional production is quite possible - that the firm has the ability to engage in a price war,
2) that physical capital, frequently, cannot be adjusted in the short run. So, firms over-build their capital stock relative to their perceived short-run optimal level, with the notion that they have room for expansion. With economies of scale, firms are more likely to over-capitalize.
So, if all of the above is not a choice, then C and D and perhaps E work for me.
Sorry for not having a certain answer.