Industry Structure and Capacity

The nature of industry structure is examined and the structure of the aluminum, copper, lead and zinc industries are described by the use of factor analysis. Capacity is defined and the relationship between industry structure and capacity utilization is examined. It is demonstrated that excess capacity is possible in industries with competitive or monopolistic characteristics, but the effects of the overcapacity are vastly different in the two cases. In a competitive industry, cycles of overcapacity with attendant fluctuating prices are expected. A change in industry structure from monopolistic to competitive characteristics over time causes profits and economic rents to be transferred from the producer to consumers of the mineral.