While Excess Capacity Can Be Costly, It Can Be a Part

question 202

True/False

While excess capacity can be costly, it can be a part of a sensible plan for preventing lost sales if demand suddenly picks up.

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Definitions:

Call

An option contract that gives the holder the right, but not the obligation, to buy a security at a specified price within a specified time period.

Value

The worth of an asset or service, determined by factors such as market demand, utility, and costs of production.

Black-Scholes

A mathematical model used to price European style options, estimating the variation over time of financial instruments.

European Options

Derivative securities that can only be exercised at the expiration date, not before, contrasting with American options which can be exercised at any point before expiration.