Which of the Following Statements Is True About Capacity Utilization

question 85

Multiple Choice

Which of the following statements is true about capacity utilization?

• A)It is the extent to which the capacity designed and installed is actually used.
• B)It is the capacity required to be utilized to meet market demand.
• C)It is calculated by dividing actual output by effective capacity.
• D)It is the ratio of design capacity to effective capacity.

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Definitions:

Value Added

Value added refers to the additional value created at each stage of production or service, calculated as the sales revenue minus the cost of raw materials and intermediate goods.

Raw Materials

The basic substances or components that are processed or refined to create goods and products.

Leakages

In the context of economics, refers to any portion of income that is not used for domestic spending, such as savings, taxes, or imports.

Injections

In the context of an economy, Injections refer to the introduction of income into the circular flow of money, such as investments, government spending, and exports.