When There Is a Capacity Constraint

question 132

Multiple Choice

When there is a capacity constraint,

• A)firms face sunk costs when deciding whether or not to expand.
• B)consumers will avoid the producer and go with a firm that has extra capacity.
• C)firms are not maximizing their profits during high season.
• D)firms can use peak-load pricing to increase profits during periods of high demand.

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Definitions:

Spot Trade

A deal where financial instruments or commodities are swapped right away.

Eurobanks

Banks located outside their country of incorporation that deal predominantly in Eurocurrencies – currencies held outside their country of origin.

Spot Trades

Financial transactions involving the immediate exchange of commodities or securities for cash or another asset.

Trade Settlement

The process of transferring securities from the seller to the buyer and the corresponding payment from the buyer to the seller.