Creating capacity that exceeds the amount of products that can be sold is inefficient because unused capacity wastes the firm's resources.

Question

Quizplus · Accepted Answer

Creating excess capacity means investing resources such as labor, materials, equipment, and facilities beyond what is required to meet current demand. This leads to high fixed costs without corresponding revenue, resulting in lower profitability and efficiency. Therefore, it is generally inefficient to have excess capacity.

Creating Capacity That Exceeds the Amount of Products That Can