I. Reading Exercises:

Exercise 1. Read and memorize using a dictionary:

utilization, yield, warrant, output, average, surplus, amount, interest rate, capacity, survey, denote, experience, validity

Exercise 2. Answer the questions:

1) What do economists and bankers watch capacity utilization indicators for?

2) Why may the efficiency of production change over time?

3) Why can higher average costs arise?

4) What is the ratio of actual output to the potential output?

Exercise 3. Match the left part with the right:

1. However, a level of utilization somewhat below the maximum prevails,	a) but normally it is measured in market values.
2. Obviously, "output" could be measured in physical units or in market values,	b) while if the operating rate is low, a situation of "excess capacity" or "surplus capacity" exists.
3. If market demand grows,	c) regardless of economic conditions. .
4. If the operating rate is high, this is called "overcapacity",	d) capacity utilization will rise

Exercise 4. Open brackets choosing the right words:

There has been some debate among economists about the validity of statistical measures of capacity utilization, because much (determines/depends) on the survey questions asked, and on the (valuation/definition) principles used to measure output.

The speaking module

II. Speaking Exercises:

Exercise 1. Describe capacity utilization, excess capacity, potential output, operating rate

using the suggested words and expressions as in example:

capacity utilization enterprise, a nation, refers to, a concept, in economics, the extent, productive, installed, capacity, which, actually example: Capacity utilization is a concept in economics which refers to the extent to which an enterprise or a nation actually uses its installed productive capacity.

excess capacity insufficient, to warrant, output, of, means, demand, expansion, that, exists

potential output existent, be produced, can, stock of capital, in the short-run, output, amount of, maximum, with

operating rate percentage rate, average, by industry, full, capacity, economy-wide, 100%, where, denotes

Exercise 2. Ask questions to the given answers:

1) Question: ___________________________________________ ?

Answer: Obviously, "output" could be measured in physical units or in market values, but normally it is measured in market values

2) Question: ___________________________________________ ?

Answer: If demand weakens, capacity utilization will slacken.

3) Question: ___________________________________________ ?

Answer: Many industries in the developed capitalist economies suffer from chronic excess capacity.