How many alternatives are considered in the capacity expansion decision?

• A. 2
• B. 3
• C. 4
• D. 5

Answer: (B)

In capacity expansion decisions, you evaluate a set of distinct actions you could take to adjust capacity and its costs and benefits. Three alternatives are typically considered: proceed with expansion now to meet expected demand, keep the current capacity (do nothing) to avoid the investment, and defer the expansion to wait for more information and potentially scale up later. This three-option framing captures the main strategic choices and helps balance risk of over- or under-investment, which is why the correct answer reflects three alternatives.