Answer to Question #48043 in Economics of Enterprise for alyssa

Question

True or False: A capacity utilization rate of 70 percent is considered full employment of capital?
In the context of a global economy, the concept of a full employment capacity utilization rate is much less important than a few decades ago?

Answer 1

A capacity utilization rate is a metric used to measure the rate at which potential output levels are being met or used. Displayed as a percentage, capacity utilization levels give insight into the overall slack that is in the economy or a firm at a given point in time. If a company is running at a 70% capacity utilization rate, it has room to increase production up to a 100% utilization rate without incurring the expensive costs of building a new plant or facility. Also known as "operating rate".
So, this statement is false.
In the context of a global economy, the concept of a full employment capacity utilization rate is even more important than a few decades ago.