If the Best Operating Level of a Piece of Equipment

question 6

Multiple Choice

If the best operating level of a piece of equipment is at a rate of 400 units per hour and the actual output during an hour is 300 units, which of the following is the capacity cushion?

• A) 25 percent
• B) 100 units per hour
• C) 75 percent
• D) 125 percent
• E) 133 percent

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Definitions:

Long-Run Equilibrium

A state in which all factors of production and costs are variable, and firms make neither excess profit nor losses in a perfectly competitive market.

Adjustments

Modifications made to accounts, budgets, or economic models to reflect changes in assumptions or economic conditions.

Monopolistic Competition

A reiteration with emphasis on a market setting where firms sell differentiated products, allowing each to have some degree of market power, facing a downward-sloping demand curve.

Short-Run Equilibrium

A state in a market where supply equals demand, but only considering a period in which some factors, like production capacity, remain constant.