Increasing production capacity allows the business to make more products themselves.

• A. True
• B. False
• C. It depends on demand
• D. It reduces efficiency

Answer: (A)

Expanding production capacity raises the maximum amount a business can produce with its existing resources. When you add more machines, extend operating hours, or hire additional staff, the ceiling for output goes up. This gives the company the option to manufacture more products in-house, rather than relying on external suppliers, provided there is demand to drive that extra production. So the statement is true: greater capacity creates the ability to increase in-house production. Remember, actual output depends on demand, but the capability to produce more in-house is what increases with capacity.