Which of the Following Would Cause Average Inventory Holdings to Decrease

question 19

Multiple Choice

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

• A) The purchase price of inventory items decreases by 50 percent.
• B) The carrying price of an item decreases (as a percent of purchase price).
• C) The sales forecast is revised downward by 10 percent.
• D) Interest rates fall.
• E) Fixed order costs double.

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Definitions:

Beneficial Supply Shock

A situation in which supply increases unexpectedly, leading to lower prices and potentially higher consumer satisfaction without causing negative economic effects.

Natural Resources

Elements found in the natural environment such as minerals, forests, water, and fertile soil, which can be harnessed for economic profits.

Long-Run Aggregate Supply Curve

A graphical representation showing the relationship between the overall price level and the total output a economy can produce when all resources are fully employed, assuming no changes in technology or resource availability.

Technological Breakthrough

Sudden, significant progress or innovation in technology that dramatically changes industries or societies.