Lower Levels of Capacity Utilization Impose Higher Costs on Firms

question 8

True/False

Lower levels of capacity utilization impose higher costs on firms (as fixed costs are spread over a smaller volume of business).This encourages firms to raise prices.

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Definitions:

Derived Demand

The linkage between consumers’ demand for a company’s output and its purchase of necessary inputs to manufacture or assemble that particular output.

Waiting Lists

Lists of individuals or entities that are waiting to receive a service, product, or opportunity, often used when demand exceeds current supply or capacity.

RFP Process

The procedure by which a company invites selected vendors or contractors to submit proposals on a specific product or service.

Value Creation

is the process through which businesses generate value for customers, shareholders, and society, often leading to competitive advantage.