Assignment Chapter 4
1. Many capacity problems encountered when a new drugs is introduced to the market. These are
some of them:
* Production capacity: we may need to buy new equipment, and it will take a while to get that
delivered, installed, tested, and running properly.
* Materials: we have to line up sources for all of the materials we will need, plus packaging, etc.
* Suppliers: finding suppliers for machinery, compounds, materials needed, etc.
2. A plant should stop growing when its long-run average cost curve hits the inflection point.
However, since this determination is often difficult to make (in the short run), other factors such
as coordination problems, excess capacity, capacity imbalance, and market shifts indicate a need
to consider setting capacity limits.
If a plant grows large enough, all of the support systems will become large enough that they
will get in the way of production. There can be diseconomies of scale. For example, if the plant
grows large enough, material will have to move so far, and people will have to walk so far, that
we pay so much to move things around that we would save money by building a separate,
3. Some capacity problems faced by:
a. An airline terminal: So many people at the airline for travelling every day. Thus, we have to
make sure we have enough capacity such as space, security, etc to provide them a best service
we can offer.