Outsourcing some production is a means of _________ a capacity constraint.

• A. relieving
• B. intensifying
• C. creating
• D. ignoring

Answer: (A)

Verified step by step guidance

1. Understand the concept of a capacity constraint: it refers to the maximum output a firm can produce given its current resources and technology.
2. Recognize that when a firm faces a capacity constraint, it cannot increase production beyond a certain limit without changing its resources or processes.
3. Consider what outsourcing production means: it involves contracting another firm or external supplier to produce some goods or services instead of producing them internally.
4. Analyze how outsourcing affects the capacity constraint: by shifting some production outside, the firm effectively increases its total production capability beyond its internal limits.
5. Conclude that outsourcing helps in relieving the capacity constraint because it allows the firm to produce more without expanding its own internal capacity.