Why Can Justifying Capacity Expansion with Economies of Scale Be

question 8

Multiple Choice

Why can justifying capacity expansion with economies of scale be dangerous?

• A)It is far too specific to use as a basis for capacity decisions
• B)Because volume,capacity,and process considerations are looked at individually
• C)Because the common notion that unit costs will decline for larger facilities due to size is not necessarily accurate
• D)It requires consideration of quality,dependability,and flexibility

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Definitions:

Fixed Cost

Costs that remain constant in total regardless of changes in the level of activity or volume of production.