The EOQ Model Is Designed to Determine How Much

question 7

Multiple Choice

The EOQ model is designed to determine how much:

• A) total inventory a firm needs during any one year.
• B) total inventory costs will be for any one given year.
• C) inventory should be purchased at one time.
• D) inventory will be sold per day.
• E) a firm loses in sales per day when an inventory item is depleted.

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Definitions:

External Benefits

Benefits derived from a product or service that affect parties who did not choose to incur that benefit.

Efficient Level

The optimal point of operation where resources are used in such a way that maximizes productivity and minimizes waste.

Negative Externality

A cost that is suffered by a third party due to an economic transaction, where the cost is not reflected in the transaction's final price.

Marginal Social Cost

The total cost society bears for the production of an additional unit of a good, including both direct costs to the producer and external costs to others.