In the Long Run, If Service Capacity Is Inadequate for the Arrival

question 26

Multiple Choice

In the long run, if service capacity is inadequate for the arrival rate, which one of the following will likely occur?

• A) Servers will slow down.
• B) Customers will demand less.
• C) Reneging will occur.
• D) Prices will be increased.

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Definitions:

ROE

Return on Equity; a financial ratio indicating the profitability of a company by comparing net income to shareholders' equity.

EBIT

Earnings Before Interest and Taxes, a measure of a company's profitability excluding interest and income tax expenses.

Total Leverage

The combined effect of using both operating leverage and financial leverage on a company's earnings before interest and taxes (EBIT).

Variable Cost Ratio

The proportion of variable costs to sales or production output, indicating how variable costs change with changes in output.