QUESTION 1

1. Set A: Select the lie (false statement).

   		a. Capacity is the volume of output per period of time that an organization can produce.
   		b. Process improvement initiatives are a good way to address capacity issues in the short-term.
   		c. Companies should always build enough reserve capacity to handle peak demands.

QUESTION 2

1. Set B: Select the lie (false statement).

   		a. Companies should always try to maximize the use of existing capacity before building new capacity.
   		b. An advantage of adding capacity in smaller increments is that increments can be added as demand grows, keeping the firms investment in excess capacity to a minimum.
   		c. An advantage of adding capacity in larger increments is that greater economies of scale are likely, lowering unit costs.

QUESTION 3

1. Set C: Select the lie (false statement).

   		a. Subcontracting may be a more cost-effective way to increase capacity than investing in internal facilities, equipment, or human resources.
   		b. A production process will only be able to operate at the rate of the lowest capacity step in the chain; companies should always solve this challenge by maximizing efficiency around the bottlenecks.
   		c. Companies should try not to run short if they sell commodity products with limited functional differentiation, if there are a large number of competitors, and if customers are time-sensitive.