If a Firm Currently Operates at Less Than Full Capacity

question 72

Multiple Choice

If a firm currently operates at less than full capacity, it must increase existing plant and equipment only if:

• A)its total variable operating costs increase with an increase in sales.
• B)the unused capacity of its existing assets is not sufficient to support a forecasted increase in sales.
• C)the internally generated funds exceed the amount required to support the forecasted increase in sales.
• D)the addition of fixed assets in large, discrete units results in economies of scale that increase operating costs.
• E)fixed operating costs tend to decrease with higher sales.

---

Definitions:

Hypothesis

A hypothesis is a proposed explanation for a phenomenon, serving as a starting point for further investigation to be tested through experimentation or observation.

Investigative Method

A systematic approach employed in various disciplines to explore and gather facts or information about a particular subject, phenomenon, or aspect of study.

Resources

Assets, material or nonmaterial, that individuals or groups have access to and can use for support, survival, or to achieve goals.

Ethics

A branch of philosophy that deals with questions about morality and the principles that govern right and wrong conduct.