As the Amount of Inventory Maintained by a Firm Increases,________

question 26

Multiple Choice

As the amount of inventory maintained by a firm increases,________.

• A) the elasticity of supply of its product increases
• B) the elasticity of supply of its product decreases
• C) the elasticity of demand for its product increases
• D) the elasticity of demand for its product decreases

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Definitions:

Average Revenue

The average amount of money received per unit of product or service sold, calculated by dividing total revenue by the number of units sold.

Marginal Revenue

The additional revenue that a firm receives from selling one more unit of a product or service.

Marginal Cost

The extra financial burden of manufacturing an additional unit of a product or service.

Price Takers

Firms or individuals who accept the market price as given and have no power to influence that price due to the competitive nature of the market.