If a Firm Currently Operates at Less Than Full Capacity

If a firm currently operates at less than full capacity, it must increase existing plant and equipment only if:

A) its total variable operating costs increase with an increase in sales.
B) the unused capacity of its existing assets is not sufficient to support a forecasted increase in sales.
C) the internally generated funds exceed the amount required to support the forecasted increase in sales.
D) the addition of fixed assets in large, discrete units results in economies of scale that increase operating costs.
E) fixed operating costs tend to decrease with higher sales.

Correct Answer:

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