Chapter 11- investment

Question 1

net investment

Answer 1

involves spending on new capital equipment over and above the level of spending on replacement of worn out equipment.

Question 2

capital intensive

Answer 2

production uses large amounts of capital equipment and relatively little labour. Productivity will be high.

Question 3

labour intensive

Answer 3

production uses large amounts of labour and little capital. many services are labour intensive.

Question 4

capacity utilisation formula

Answer 4

current output/full potential output x100

Question 5

capacity utilisation definition

Answer 5

measures the extent to which the capacity of the business is in use

Question 6

underutilised capacity

Answer 6

raises unit costs because the fixed costs are spread over a lower level of production

Question 7

over-utilised capacity

Answer 7

means that the business is trying to produce more than its capacity will allow. May lead to rising costs.