What does increasing production capacity allow a business to do?

Increasing production capacity allows a business to make more products themselves, enabling it to meet higher demand and produce at a larger scale. When a business scales up its production capacity, it can take advantage of economies of scale, potentially reducing the cost per unit and increasing profitability. This capacity increase can come from various means, such as investing in new machinery, expanding facilities, or optimizing existing processes.

By producing more products internally, the business can ensure it has sufficient inventory to meet customer needs, respond to market changes, and compete effectively in its industry. The option that focuses on producing less inventory is contrary to the goal of increasing capacity, which is to enhance production capabilities and subsequently satisfy customer demand. Additionally, reducing sales opportunities or limiting product variety would generally be counterproductive objectives for a business seeking growth and competitive advantage.