Which of the Following Is Not a Reason Why Capacity

question 135

Multiple Choice

Which of the following is not a reason why capacity decisions are so important?

• A)Capacity limits the rate of output possible.
• B)Capacity affects operating costs.
• C)Capacity is a major determinant of initial costs.
• D)Capacity is a long-term commitment of resources.
• E)Capacity chunks can be added or deleted quickly and inexpensively.

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Definitions:

Marginal Cost of Production

The cost of producing an additional unit of a good, taking into account both variable and fixed costs.

Price Elasticity of Demand

A measure of how much the quantity demanded of a good responds to a change in the price of that good, with elasticity greater than 1 indicating a high responsiveness.

Marginal Cost

The increase in cost resulting from the production of one additional unit of output.

Advertising Elasticity of Demand

Advertising elasticity of demand quantifies the change in demand for a product as a result of a change in the amount of advertising for that product.