Which of the Following Would Cause Average Inventory Holdings to Decrease,other

question 31

Multiple Choice

Which of the following would cause average inventory holdings to decrease,other things held constant?

• A) Fixed order costs double.
• B) The purchase price of inventory items decreases by 50 percent.
• C) The carrying cost of an item decreases (as a percent of purchase price).
• D) The sales forecast is revised downward by 10 percent.
• E) None of the above (all would cause average inventory to increase).

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Definitions:

Monopolistically Competitive

Describes a market structure where many firms sell products that are similar but not identical, allowing for competition but also some degree of market power.

Economic Profits

Profits calculated after considering both explicit and implicit costs, representing the total opportunity costs.

Loses

Refers to the situation where expenses surpass revenues, resulting in negative financial performance.

Long-Run Monopolistically Competitive Equilibrium

The condition in which firms in a monopolistically competitive market earn just enough revenue to cover all costs, including a normal profit, in the long term.