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Unformatted text preview: Consider why do we use capacity? Because we always want to attach a cost into the thing that caused that cost. Sometimes our link is quite weak, and we get stuck because our information is weak. For variable costs our decision to make another unit will make the cost go up. We are always attaching the cost to the original decision to have that cost. So this generation plant was made a long time ago based on the requests put out by the towns. So they built the plant and told each of the towns that they were responsible for their part of the fixed cost, regardless of if demand drops....
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- Spring '10