Increasing capacity utilization beyond the best operating level results in diseconomies of scale.

Question

Quizplus · Accepted Answer

If a company increases its capacity utilization beyond the best operating level, it may experience inefficiencies, such as increased operational costs, increased employee turnover, and reduced product quality. These inefficiencies are known as diseconomies of scale and can lead to decreased profitability.

Increasing Capacity Utilization Beyond the Best Operating Level Results in Diseconomies