What is meant by "excess capacity"? How does it relate to consumer utility?

What will be an ideal response?

Excess capacity refers to a situation where a firm does not produce at the lowest possible average cost. In other words, economies of scale have not been exhausted. Excess capacity is an inevitable consequence of product differentiation. Firms differentiate their products in order to appeal to consumers' varied tastes. Consumers are, therefore, better off—they have greater utility—than they would be if companies did not differentiate their products. Consumers are willing to pay for the higher costs that result from product differentiation.