If a Firm Has Excess Production Capacity, It

question 134

Multiple Choice

If a firm has excess production capacity, it

• A) can serve as a safety net if demand suddenly picks up.
• B) may be a sign that there's too much competition.
• C) may make sense for the marketing manager to try to find new markets for current products.
• D) can be costly.
• E) All of these.

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Definitions:

Complements

Complements are goods or services that are used together, so that the consumption or use of one increases the demand for the other.

Durable Good

A type of good that does not quickly wear out and is capable of being used for a period of time, often years, before needing replacement.

Automobile

A wheeled motor vehicle used for transportation, typically powered by an internal combustion engine or electric motor.

Substitute Good

A product or service that consumers see as a viable alternative to another product, where an increase in the price of one leads to an increase in demand for the other.