Q11. [1pt] Suppose a firm has several factories that it can use to satisfy deman
ID: 425039 • Letter: Q
Question
Q11. [1pt] Suppose a firm has several factories that it can use to satisfy demand for several products. Furthermore, each factory is operating at close to 100% utilization. Which action is likely to be most effective to increase sales? a) Increase mean demand. b) Decrease mean demand. c) Reconfigure the factories so that they can produce a broader set of products. d) Focus the factories so that they each produce one product. e) Reduce the number of products sold. f) Increase capacity. g) Decrease capacity.Explanation / Answer
The most effective action would be option f,i.e. increase the capacity of the plants.
As the factories are running at 100% utilization, the supply from each of these plants in the current state cannot be increased without an increase in the capacity of the plants.
Reconfiguring the factories to produce a broader range of products would not guarantee if the sales of the products would increase. It can also decrease depending upon the demand for the new products.
Refocusing factories to produce 1 product each would lead to increased difficulty in making the different products available to the general public if the locations of the factories are spread out. This could even lead to lower sales.
Reducing the number of products might lead to excess inventory left of the products which are sold due to their demand being satisfied.
Decreasing capacity would lead to decreased sales.
The mean demand can only be influenced by the supply of the products which is at maximum capacity in the current state.
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