The aim of this paper is to discuss a subject that has not deserved much attention in economic analysis in Brazil: it is about the accuracy of the measure of the degree of capacity utilization. We start with the research by Robin Marris about the economics of capacity utilization and we suggest two interpretations about the behavior of the firm in respect to the decision about how to use productive capacity. Next, we investigate two types of methodology about how to estimate empirically the degree of capacity utilization. We conclude that the concept of capacity does not present a unique theoretical definition and that its empirical estimation is quite difficult, implying that an interpretation of the results should take into account conceptual and methodological limitations of the variable degree of capacity utilization.
productive capacity; degree of capacity utilization; potential output