A Large Capacity Cushion Is Appropriate When

question 1

Multiple Choice

A large capacity cushion is appropriate when

• A) a make-to-stock process is used.
• B) a firm is attempting to capture market share in a growing industry.
• C) the market for its products or services is shrinking.
• D) a firm wants its capacity to match average demand.

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Definitions:

Consumer Income

The total amount of income earned by consumers in an economy, including wages, salaries, benefits, and other income sources, influencing their buying power.

Demand Curve

A graph that shows the relationship between the price of a good and the quantity demanded by consumers at various prices.

Law of Supply

The economic principle stating that as the price of a good or service increases, the quantity supplied of that good or service will also increase, ceteris paribus.

Decreasing Opportunity Costs

A situation in which sacrificing less of one good to produce another becomes possible, often due to efficiencies or learning.