Which of the Following Statements Is False

question 74

Multiple Choice

Which of the following statements is false?

• A) Optimal inventory levels involve a trade-off between carrying costs and order costs.
• B) Carrying costs include the cost of storing goods as well as the cost of capital tied up in inventory.
• C) Inventory levels will be lower when storage or interest costs are high and will be higher when restocking costs are high.
• D)Inventory levels do not rise in direct proportion to sales. As sales increase, the optimal inventory level rises, but more than proportionately.

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Definitions:

Firm

An organization that produces goods or provides services, usually with the aim of making a profit.

Economic Profit

The difference between the total revenue generated by a business and the total costs, including both explicit and implicit costs.

Minimum Return

The lowest expected or required return on an investment over a specified period.

Long Run

A period of time in which all factors of production and costs are variable, allowing for all adjustments to take place in the analysis of economic conditions.