A footwear firm builds a new plant with capacity equal to the highest monthly demand. Which capacity strategy is used?

Constant capacity refers to maintaining a steady level of production or service capability regardless of fluctuations in demand. This strategy does not align with the firm's decision to build a plant based on the highest demand, as it would not accommodate varying consumer needs effectively.

Lag capacity involves delaying capacity expansion until after an increase in demand has been confirmed. This approach is more conservative and risk-averse, focusing on minimizing costs and avoiding overcapacity. The firm’s strategy of matching capacity to the highest demand does not reflect this cautious approach.

Match capacity entails adjusting capacity to align closely with current demand, often through incremental changes. While this strategy aims to avoid overcapacity, it does not represent the firm’s approach of constructing a plant with the capacity for the highest demand, which indicates a more aggressive and forward-thinking strategy.