What does it mean when a cost-capacity factor is less than 1? What does it mean...

What does it mean when a cost-capacity factor is less than 1? What does it mean when it is greater than 1?

Expert Solution

A cost capacity factor is a factor showing relationship between cost and capacity of a component or plant.

It is used as an exponent in the cost-capacity equation.

If cost-capacity factor is less than 1, it means cost is less than the capacity and thus it means there are economies of scale and thus cost advantages at larger scale of operations.

If cost-capacity factor is greater than 1, it means cost is more than capacity and thus it means there are disceconomies of scale and increasing size of operations would prove to be expensive.

Rahul Sunny answered 2 years ago

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