Asked by Marisa Maynes on Jul 17, 2024
Verified
For products like parking lots and hotels,costs of building capacity are mostly fixed or sunk and firms in this industry typically face capacity constraints.Therefore,
A) If SRMR>SRMC at capacity,then the firms should price to fill capacity
B) If SRMR<SRMC at capacity,then the firms should price to fill capacity
C) If LRMR>LRMC at capacity,then the firms should price to fill capacity
D) If LRMR>LRMC at capacity,then the firms should price to fill capacity
Building Capacity
The process of increasing the production capability of a facility or the potential to produce more outputs.
Capacity Constraints
Limitations related to the maximum level of output or activity that can be achieved due to existing resources.
SRMR
Standardized Root Mean Square Residual, a goodness-of-fit statistic in structural equation modeling that measures the difference between observed and predicted correlations.
- Comprehend the fundamentals of pricing based on capacity in sectors providing services.
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Learning Objectives
- Comprehend the fundamentals of pricing based on capacity in sectors providing services.
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