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Chapter 2: Problem 7

An economy operating its plant and equipment at full capacity implies a capacity utilization rate of ( LO5) a) 40 percent c) 85 percent b) 70 percent d) 100 percent

Short Answer

Expert verified
d) 100 percent

Step by step solution

01

Understand capacity utilization rate

Capacity utilization rate is a percentage measurement that indicates the level of production in an economy compared to the potential output if all resources were utilized efficiently. In other words, it shows how much of the total productive capacity is being used at a given point in time.
02

Determining the meaning of full capacity

Full capacity refers to a situation in an economy when the utilization of available resources is maximized, and the economy is producing at the highest level possible without causing undue strain on resources or risking negative side effects such as inflation. So, when an economy is operating at its full capacity, it means that it is making the most out of its resources, and the capacity utilization rate should be at the highest level possible.
03

Analyze the given options

We are given four options for the capacity utilization rate when an economy operates its plant and equipment at full capacity: 40%, 70%, 85%, and 100%. We are supposed to identify the percentage that represents full capacity.
04

Choose the correct answer

Since full capacity represents the maximum possible capacity utilization, the correct answer is the highest possible percentage in the options provided:\ d) 100 percent. This means that when an economy is operating its plant and equipment at full capacity, the capacity utilization rate is 100%.

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Most popular questions from this chapter

Which statement is true? (I.O6) a) \(A\) s our economy recovers from a recession, it moves closer to its production possibilities curve. b) When an economy moves into a recession, it slides along its production possibilities curve. c) We have never operated outside our production possibilitics curve. d) There is no way to represent a bad recession or a depression on a graph of the production possibilities curve.

The production possibilitics curve represents \- (LO6) a) our cconomy at full cmployment but not full production b) our cconomy at full production but not full cmployment c) our economy at full production and full employment

Miranda Bowman, a Harvard MBA, is almost definitely if she is working as a secretary. (LO5) a) unemployed b) underemployed c) both unemployed and underemployed d) neither unemployed nor underemployed

The closer we are to the origin and the farther away we are from the production possibilities curve (L.O6) a) the more unemployment there is b) the less unemployment there is c) the more guns we are producing d) the more butter we are producing

As we produce increasing amounts of a particular good, the resources used in its production ( \(\angle 07)\) a) become more suitable b) become less suitable c) continue to have the same suitability
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