SELF TEST #19B: Future Capacity
When should a company undertake an extensive analysis of future capacity?
In what forms can a company add capacity in an industry?
How high must prices be in order for the industry to be willing to add new capacity?
If an industry needs to reduce capacity, what alternatives are available to it?
The industry is consolidating with many mergers and acquisitions. Will this reduce industry capacity?
Should an industry leader voluntarily withdraw producing capacity in order to help the industry raise its prices?
Assume for the moment that an industry is currently in overcapacity, where there is more capacity than there is industry demand. Suddenly, it finds itself unable to secure enough raw materials to keep all its current capacity operating. What is likely to happen to industry prices?
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