Final answer:
The aspect related to incumbents' production capacity when assessing ventures is production efficiency. Firms choose production technologies based on the lowest total cost and may shift from capital to labor if the cost of machinery rises. Changes in input costs or technological advancements can significantly affect market dynamics.
Step-by-step explanation:
When assessing high and low potential ventures, the aspect that relates to incumbents' production capacity is c) Production efficiency. Businesses must evaluate how effectively incumbent firms utilize their production capacity to meet market demand. When considering production technology, firms will select the option with the lowest total cost, which often involves a trade-off between capital and labor inputs. For instance, if the cost of machinery rises significantly, companies are likely to adjust their production technology to use less capital and more labor.
In an environment similar to the United States in the 1970s, limited market demand may not support all existing firms, leading to a prediction that some firms will exit the market. This underlines the importance of reaching the minimum point of the average cost curve to ensure long-term viability. Moreover, the introduction of new technology that significantly reduces production costs in a perfectly competitive market will typically result in lower market prices and could lead to increased market efficiency and competition.
Finally, when one input becomes relatively more expensive, firms must make strategic decisions about their production technology. They will likely shift towards using more of the cheaper input to control costs and maintain their competitiveness. This kind of strategic shift is essential in high and low potential venture assessments.