When a Firm Has Surplus Capacity (That Is, No Resource

question 84

Multiple Choice

When a firm has surplus capacity (that is, no resource constraints) , relevant costs for decision-making (for example, determining short-term product mix) will, relative to the situation where the firm faces one or more resource constraints, be:

• A) Lower.
• B) The same.
• C) Greater.
• D) It varies—that is, it is impossible to tell without further information.

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Definitions:

Preemptive Right

A shareholder’s option to purchase new issuances of shares in proportion to the shareholder’s current ownership of the corporation.

Model Business Corporation Act

A set of model laws prepared to assist states in drafting legislation to regulate the formation and operation of corporations.

Articles of Incorporation

The primary document required to register a corporation with a state, detailing the fundamental aspects of the company, such as its name, purpose, and structure.

Share Split

A corporate action in which a company divides its existing shares into multiple shares to boost the liquidity of the shares, although the overall value of the shares remains the same.